Daily FX Update, 12 April 2016

OVERNIGHT MARKET UPDATE:

·         Global – OECD said its leading indicators see growth easing off in major advanced economies, with the outlook continuing to deteriorate in the US and UK while the German economy is losing steam. Elsewhere, the leading indicator showed signs of stabilisation in China, India and France.

·         US – Fed Chairwoman Yellen and President Obama met privately to talk about the economic outlook, labour markets, inequality and “potential risks to the economy, both in the US and globally.” White House spokesman also stressed that the President would not discuss the level of interest rates right now.

·         China – March CPI inflation continues to be food driven. Headline CPI rose 2.3% y/y in March, steady from February. This was driven by food, tobacco, and liquor which rose 6.0% y/y. On a monthly basis, CPI declined 0.4%, as food prices fell 1.8% after the Chinese New Year in February.

·         China – The PPI reading offers signs of relief, with the contraction narrowed to -4.3% y/y in March, up from -4.9% in February. Commodity prices, notably oil and iron ore, have rebounded since January.

·         Currencies – A relatively quiet night for currency markets with USD/JPY consolidating and the USD broadly under some pressure.

·         Equities – US bourses finished lower as concerns about lacklustre quarterly earnings outweighed a rally in crude oil prices. The S&P500 closed lower by 0.3%, the Dow Jones down 0.1%, while the tech-heavy Nasdaq ended 0.4% lower.

·         Rates – Rates markets took a back seat as the focus was on equities after the strong showing in Asian markets in the local session. US 10-year Treasuries closed 1 bp higher.

·         Energy – WTI crude oil price settled back above US$40 a barrel for the first time since late March, buoyed by a third straight week of declines in the number of US rigs drilling for crude as well as data pointing to stronger US and China demand.  

·         Precious Metals – The declining USD is supporting the gold rally, even in a risk-on environment.