Daily FX Update, 08 April 2016

OVERNIGHT MARKET UPDATE:

·         US – Consumer credit jumped by US$17.2 billion in February after rising by an upwardly revised US$14.9 billion in January, suggesting that consumer spending will continue to prop up the economy.

·         US – The initial jobless claims fell to 267,000, a decrease of 9,000 from the previous week’s unrevised level of 276,000. The latest reading also beat market expectations for a decline of 4,000.

·         Euro area – The March ECB Minutes indicated that the Governing Council still sees scope for further rate cuts if needs be. There appears to have been broad support for the package of measures unveiled at the meeting. However, there were differences of opinion about the merits of the different components, with some members expressing concerns over some of the side effects.

·         Currencies – JPY was the main focus for markets as it continued to strengthen. If sustained, this could herald a sea change in the way global currencies react to monetary policy. GBP remained under pressure as markets continue to worry about Brexit.

·         Equities – Equites were in the red in both Europe and the US, weighed down by bank stocks amidst concerns that low yields will weigh on earnings. The Euro Stoxx 50 dropped 1.3%. In the US, the Dow was down 1.0% and S&P500 1.2% lower by the close.

·         Rates – US 10-year benchmark yield tumbled to its lowest level since 11 February 2016 as investors sought the safety of government bonds amid a renewed selloff in equity and oil markets.

·         Energy – Crude oil prices declined in the wake of an unexpected decline in US crude inventories faded. Investors are lacking confidence about improved US seasonal demand as the decline in US crude stockpiles was mainly attributable to weaker imports and improved refinery utilisation.  

·         Precious Metals – A weaker US equity market lent support to global volatility and put gold again at centre stage for investors.