Daily FX Update, 20 October 2015

OVERNIGHT MARKET UPDATE:

·         US – The National Association of Home Builders (NAHB) index rose to its highest level since October 2005 at 64, driven by optimism among builders over stronger future housing demand. Rising real disposable income, buoyant consumer confidence and continued labour market strength along with low mortgage rates are the key ingredients to this. 

·         Euro area – ECB Governing Council member Nowotny reiterated that the euro area economy needed more effort from structural reform and fiscal policy to help bolster growth. Regarding this week’s ECB meeting, he said that it was too early in his view to discuss additional QE as the current initiative still has nearly a year to run. 

·         Currency – A light data calendar and lower volatility in risk markets did not manage to drive the USD down as expectations of a dovish tilt from the ECB and weaker oil prices provided the USD with a slight bid tone.                         

·         Equity – It was a mixed session for global equity markets. A positive tone from Asian markets and China’s GDP spilled over into Europe. European equities finished up slightly, while the FSTE 100 index fell 0.4%. US equities finished up slightly as well, with the Dow Jones and the S&P 500 up 0.03% and 0.08% respectively.                   

·         Rate – It was a lacklustre session for US Treasuries. Little US dataflow saw muted ranges and 10-year yields down 1 basis point to 2.02%.                        

·         Energy – Crude oil prices were weaker on the negative sentiment stemmed from the build-up in crude stockpile and concerns around slowing global growth. China has reported the slowest economic growth since 2009, raising concerns around future growth in demand for oil. Inventories continue to rise, with Saudi Arabia’s commercial crude stockpiles in August rising to their highest levels since at least 2002.        

·         Precious Metal – Gold prices came under pressure after the release of strong US economic data. The strong US housing data revived concerns that policymakers could soon raise interest rates.