Daily FX Update, 13 April 2016

OVERNIGHT MARKET UPDATE:

·         Global – The IMF’s World Economic Outlook (WEO) was released overnight, with global growth cut to 3.2% (-0.2ppt) in 2016. A number of risks to the global economy were highlighted: a disorderly pullback of capital from emerging markets; China’s transition; strains on oil exporters; bouts of financial market volatility and tighter financial conditions; protracted recessions in EM countries currently experiencing distress; geopolitical risks; and the potential ‘Brexit’.

·         US – The NFIB Small Business Optimism index dipped to a two-year low of 92.6 in March, against the 92.9 in February and market expectations of a pick up to 93.5.

·         Euro area – The final reading of German CPI was in line with preliminary data, up 0.8% m/m and 0.3% y/y. On an EU harmonised basis, inflation was up 0.1% y/y. The wholesale prices rose 0.3% m/m, but fell 2.6% y/y.

·         UK – The headline CPI rose 0.5% y/y and core CPI rose 1.5% y/y in March, due to a spike in volatile airfares due to the early Easter holiday. The Retail Price Index rose 1.6% y/y and PPI Output rose 0.3% m/m.

·         Currencies – The USD liquidation continues, lifting currencies against the USD. USD/JPY rebounded as Japan Finance Minister Aso said it is acceptable to act against ‘one-sided, speculative’ exchange-rate movements.

·         Equities – A positive session for equities, with oil prices boosting energy stocks. The Euro Stoxx 50 finished up 0.6%, while the S&P 500 was up 1.0%.

·         Rates – Bond markets followed risk sentiment, with yields generally higher across the board. US 5- and 10-year benchmark yield rose 5 bps to 1.21% and 1.78%, respectively.

·         Energy – Oil prices rose around 4% on speculation Saudi Arabia and Russia have reached a consensus on an output freeze. Adding further support to prices, a US government agency cut its forecasts on domestic crude output for this year and next.  

·         Precious Metals – Gold prices shrugged off rallies in equities and crude-oil prices to rise as investors focused on weak corporate quarterly results and a bleak outlook for global growth offered by the IMF.