Daily FX Update, 02 October 2015

OVERNIGHT MARKET UPDATE:

·         US – September ISM came in lower at 50.2, compared to 51.1 in August. That was the third consecutive monthly fall. Manufacturing is stagnant and the sub-components of the index point to further potential weakness near term. New orders dropped to 50.1, production fell to 51.8 and the export index was unchanged at 46.5. Employment eased to 50.5. Manufacturing is suffering from weak overseas demand and is soggy globally. Elsewhere, August construction spending in US rose 0.7% on monthly basis, driven by a 1.3% increase in private residential construction.  

·         US – FOMC voting member, Jeffrey Lacker, said that the Fed could get enough new information by its late October policy meeting to spur officials to raise short-term interest rates then. US consumers continued to spend in August despite all of the turmoil and it seems like that is carrying into September, he added.   

·         Euro area – The final September PMI of 52 was down fractionally from August’s 52.3 print. Germany’s PMI fell but the French manufacturing PMI was upgraded to 50.6 from the flash 50.4 estimate, the first reading above 50 in three months.       

·         Currency – It was a night of two halves that resulted in a draw, with most currencies broadly unchanged. First up risk was on the offensive, but faded late in the game as weaker US data saw global sentiment again sour.                     

·         Equity – Equity markets were mixed, with most major European indices down. In the US, equities were largely unchanged. The S&P 500 was up 0.2% while the Dow Jones finished 0.1% lower.                

·         Rate – Government bond yields are generally lower. Yields are lower across the board in Europe, but moves in the key US market were more muted. US 10-year Treasury yields remained unchanged at 2%, while the 2- and 5-year yields increased 2 and 1 basis point(s) respectively.                  

·         Energy – Both WTI and Brent recorded losses as weak equity markets and the weaker-than-expected US manufacturing data weighed on sentiment.   

·         Precious Metal – Gold prices were weaker, with volumes particularly low.