Daily FX Update, 06 April 2016

OVERNIGHT MARKET UPDATE:

·         US – The ISM non-manufacturing index in March rose to 54.5 from 53.4 the month before, a signal that business conditions are moving at a positive pace. The increase by the headline index was partly due to a jumpy by the business activity index. Both new orders and employment index also recorded a higher reading in March.

·         US – The trade deficit widened to US$47.1 billion in February from a revised US$45.9 billion deficit in January as imports rising at a faster rate than exports. The widening in the deficit in February and modest upward revision to the January deficit will subtract from Q1 GDP.

·         US – The number of job openings in February fell to 5.45 million from 5.6 million in January, but still the second highest since July 2015. The hiring rate increased to 3.8% while the quits rate, a measure of the willingness to leave one job for another, also increased to 2.1%.

·         Euro area – The composite PMI was little changed at 53.1 in March from February’s 53.0. February retail sales rose 2.4% y/y, slightly faster than the January’s 2.0% growth. 

·         Currencies – USD/JPY touched the lowest level since 31 October 2014 and EUR displayed risk-off resilience, in the wake of a global equities selloff.

·         Equities – Fears about global economic health dogged the market and fueled selling in traditionally riskier assets. US equities were down with the Dow, S&P500 and Nasdaq 0.8 to 1.0% lower.

·         Rates – The backdrop of weaker equities and lower oil prices took 10-year US Treasury and bund yields as low as 1.713% and 0.08% respectively, with yields rising back only modestly following solid US data. 

·         Energy – Crude oil prices ended modestly higher after a choppy session. The comment by the Kuwait OPEC governor provided some support to prices. He said oil producing countries could still come to a supply agreement to cap production without Iran.

·         Precious Metals – Gold prices finished higher as investors rushed toward safety plays amid a global stock-market downdraft.