Foreign Exchange Market Update
May 24, 2016
Indicative Interbank spot sell rates only as of 9:00 AM PST.
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United States (US) New Home Sales rose by 16.6% to 619k. This compared with market expectations for an increase to 523k, from the March level of 511k. Sales are now 23.8% above their year ago level. The Inventory of Homes Available for Sale fell by 0.4% to 243k. Inventories are now 17.4% above their year ago level. Combined with the increase in sales, the Months' Supply dropped to 4.7 months from 5.5 months. This is modestly below a "normal" level of 6.0 months. Home Prices rose with median prices 9.7% above their year ago level and with average prices 13.5% above their year ago level. Richmond Manufacturing Index fell to a seasonally adjusted annual rate of -1, from 14 in the preceding month.
Australia’s dollar traded at 71.79 U.S. cents at 11:33 AM PST and New Zealand dollar traded at 67.35 U.S. cents. ANZ-Roy Morgan Australian Consumer Confidence added to recent gains, rising 0.5% this week to 115.7, to be 3.6% higher over the past four weeks. This increase likely reflects several factors including last week’s jobs report (which confirmed healthy conditions in the labor market), strong auction clearance rates, the positive impact from the RBA rate cut three weeks ago, and ongoing gains in equity markets since early April. New Zealand imports, exports, and trade balance data will be coming out later today 5/24/2016.
Euro traded at 1.1149 against USD at 11:33 am PST. The German government's increased spending on refugees and the European Central Bank's ultra-low interest rates were among factors singled out by analysts to explain the biggest quarterly expansion in two years for Europe's largest economy. Gross fixed capital formation in construction increased by 2.3%, partly helped by a mild winter, while gross fixed capital formation in machinery and equipment rose by 1.9%. Private consumer spending increased by 0.4% and public spending rose by 0.5%. Strong private consumption and higher construction investment drove a 0.7% rise in German gross domestic product in the first quarter, more than offsetting the effects of weaker foreign trade. While, French business confidence weakened in May after strengthening in the previous month as export demand weakened sharply. The manufacturing business confidence index fell to 104 from a revised 105 in April. And French Business Confidence rose to an annual rate of 102 from 101 in the preceding month.
Canadian dollar traded at 1.3147 per USD at 11:33 am PST. The Bank of Canada holds its May monetary policy meeting tomorrow and is due to release its interest rate decision alongside a short statement. Interest rate markets are pricing in not only a very low probability of a rate change at this week’s meeting, but there is very little priced in, in either direction, for BoC rates for the duration of 2016. The key development since the Bank last met are the wildfires in Alberta that significantly slowed oil production activity and will likely weigh on second quarter growth. The Bank has already signaled that it expects an uneven pace of GDP growth in the near-term, with first quarter GDP growth benefitting from timing issues surrounding trade flows and retail activity that give way in the second quarter. The wildfires are likely to widen the gap between what looks likely to be a strong first quarter growth pace and a weak second quarter.
Onshore Chinese yuan traded at 6.5555 per USD at 11:33 am PST and offshore Chinese yuan traded at 6.5659 per USD. The Westpac MNI China CSI fell 0.3% to 117.8 in April after rising sharply by 6.1% to 118.1 in March. The slight pullback in consumer sentiment in April was led by a fall in expectations of business conditions in a year’s time. Consumers were also less confident about the outlook for their personal finances. Consumer sentiment has continued to fall to 114.2 in May.
This market update is prepared by Cathay Bank for informational purposes only and does not constitute any form of legal, tax or investment advice, nor should it be considered an assurance or guarantee of future exchange rate movements or trends. This information is provided without regard to the specific objectives, financial situations or needs of any recipient. Cathay Bank does not make any representations or warranties about the accuracy, completeness or adequacy of this market update.