Daily FX Update, 05 April 2016

OVERNIGHT MARKET UPDATE:

·         US – Boston Fed Rosengren (Voting Member) said the Fed could raise interest rates faster than markets anticipate if the US economy continues to withstand turbulence overseas.

·         US – New orders for manufactured goods declined 1.7% in February as demand fell broadly, reversing January’s downwardly revised 1.2% increase. Orders for non-defence capital goods excluding aircraft fell by a steeper 2.5% in February.

·         Euro area – The unemployment rate fell to 10.3% in February compared to 10.4% in January and 11.2% a year earlier, continuing its slow but steady improvement. Pipeline disinflationary pressures remain intense in the euro area, however. In February, producer prices fell 0.7% m/m and were down 4.2% y/y. That was the biggest decline since December 2011. 

·         UK – The construction PMI remained stable at 54.2 in March, defying economists’ expectations for an ease. New orders rose at the weakest pace since the pre-election slowdown in April 2015, while the rate of job creation easing to its slowest since June 2013.

·         Currencies – Falling oil prices helped support haven bids in the Japanese yen as Japanese and US stocks fell, despite the hawkish comment from Fed Rosengren.

·         Equities – US stocks closed lower as losses for industrials and materials offset sharp gains in health-care shares. Fresh drop in oil prices also weighed on risk appetite.

·         Rates – It was a quiet session, with 10-year UST bond yields closed only 1 bp lower as oil and equities were declining.

·         Energy – Both Brent and WTI crude oil prices ended lower after latest comments by Saudi Arabia indicated it won’t participate in a coordinated production freeze unless Iran changes course and agrees to take part. 

·         Precious Metals – Gold prices fell to the lowest level in over a month after Fed Rosengren suggested that an earlier-than-expected interest rate hike is likely.