Daily FX Update, 15 April 2016

OVERNIGHT MARKET UPDATE:

·         US – The headline CPI rose by 0.1% m/m in March after falling 0.2% in February, as higher cost of filling up at the gas pump offset lower prices for groceries and new clothes. The core CPI rose 0.1% m/m in March, as the cost of housing and medical care showed moderated growth.

·         US – The initial jobless claims fell to 253k for the week ending 9 April, reaching their equal lowest level since November 1973. Continuing claims eased to 2,171k from a downwardly revised 2,189k. Meanwhile real average weekly earnings rose 1.1% y/y in March from 0.7% y/y in February.

·         UK – The policy rate was unchanged in the UK at 0.50% and the asset purchase target remained at GBP375bn, with the decision on the MPC unanimous. There was no significant new information in the BoE MPC summary and minutes. The majority of the concerns raised about inflation and the impact of the looming UK vote on EU membership have generally been raised in the past month or two.

·         Currencies – GBP weakened as the BoE expressed concerns about a potential Brexit fallout and the US dollar rose amid mixed economic data and efforts to stem the recent strength of currencies including the Japanese yen and Singapore dollar.

·         Equities – The S&P 500 and the Dow closed slightly higher as the drop in unemployment claims pointed to strength in the jobs market

·         Rates – Government yields generally rose despite softer than expected US inflation data and comments by the Fed’s Lockhart that a June hike should remain an option. 10-year US Treasury benchmark yield closed at its highest level this month. Yields in the 5- and 7-year tenor were up 4 bps respectively.

·         Energy – Crude oil prices closed lower before the Doha talks. EIA data suggest the global oil surplus will diminish to 0.2 million barrel per day in the last six months of 2016, from 1.5 million barrel per day in the first half.  

·         Precious Metals – Gold prices fell as the US dollar maintained its strength and demand for riskier assets remained relatively robust.