Daily FX Update, 27 April 2016

OVERNIGHT MARKET UPDATE:

·         US – The provisional March data on durable goods showed a rise of 0.8% m/m vs market expectations of a 1.9% m/m gain. The rise was entirely driven by a big increase in defence aircraft, with core orders unchanged on the month (the market had expected a 0.6% rise).

·         US – The April consumer confidence saw a decline to 94.2 from previous month’s 96.1. Despite the drop, consumer confidence is still around the highs seen since the recovery started back in mid-2009. Consumer fundamentals remain healthy though, driven by a robust labour market, low interest rates and rising asset prices (housing and equity).

·         US – The April preliminary Markit Services PMI came in at 52.1, up from the final reading of 51.3 in March. The composite index edged up to 51.7 from 51.3 in March, suggesting broader economic activity is holding up.

·         US – The S&P/Case Shiller 20-City index showed that house prices rose 5.4% y/y in February, a slightly slower pace than in January. The S&P said that the rising prices continued to be fuelled by tight inventory of homes available, despite the improvement in Americans’ credit with mortgage defaults lower than in 2004.

·         Currencies – The USD remains on the back foot ahead of the FOMC. The weak durable-goods data also weighed on the movement of the USD.

·         Equities – US stocks closed marginally higher with the S&P500 stuck in a tight range as caution prevailed ahead of big-name tech earnings and the conclusion of the Fed’s two-day policy meeting.

·         Rates – US Treasury yields closed higher as investors braced for a Fed announcement that could offer clues on interest rates in coming weeks. Core

·         Energy – A weaker USD and expectations of stronger fundamentals drove crude oil prices higher. Sentiment continues to improve, with major producer BP suggesting the markets may rebalance by the end of the year.

·         Precious Metals – Gold prices inched higher as the weaker USD has supported demand, but investors remain wary heading into the central bank meetings later this week.