Daily FX Update, 20 April 2016

OVERNIGHT MARKET UPDATE:

·         US – The housing starts plunged 8.8% in March to a seasonally adjusted annual rate of 1.09 million, far below the market expectations for a decline of 1.1%. The building permits also sank, touching a 12-month low of 1.09 million, down 7.7% from the previous reading. While February starts and permits were both revised up, the March data underscore the choppy nature of the housing recovery.

·         Euro area – The ECB’s quarterly bank lending survey showed that the ECB’s negative deposit rate “had a positive impact on lending volumes, in particular for loans to households.” But this hurt banks’ interest income and loan margins, the survey said.

·         Euro area – The euro area’s current account surplus narrowed sharply to EUR19.0 billion in February from an upwardly revised EUR27.5 billion in January. The data showed surpluses for goods, services and primary income, but offset by a deficit in secondary income.

·         Euro area – Germany economic sentiment rose to 11.2 in April from March’s reading of 4.3, on easing concerns over China. The current condition index, however, fell to 47.7 this month from 50.7 in March. Meanwhile, the index of euro area economic sentiment jumped to 21.5 in April from 10.6 a month earlier.

·         Currencies – The USD weakened against major currencies as oil prices rose and housing data disappointed, with JPY the exception as markets moved away from safety.

·         Equities – US stocks closed little-changed with the Dow Jones and S&P500 gaining slightly and the Nasdaq slipping as tech stocks weighed on the broader market.

·         Rates – US Treasuries fluctuated over the course of trading session before eventually ending lower. The yield on the benchmark 10-year note, inched up by just 1 bp.

·         Energy – Crude oil continued its recovery as the attention returned to fundamentals. The strike by workers in Kuwait highlights the impact ongoing disruptions and closures are already having on the market.

·         Precious Metals – The weaker USD provided support to gold prices. The recovery in oil prices has also quashed any concern that inflation expectations would fall.