Morning Update – 16/03/16 – by Arjun Lakhanpal

Morning all.. Wall St was on hold as we wait for the FOMC meeting tonight and the S&P closed marginally lower. Asia was a little weaker with the Nikkei down 0.8% and HK down 0.4% but China up 0.5%. Oil is almost 1% higher and US yields marginally lower in Asia so a relatively quiet night. In FX most were quiet but USDJPY rose as Kuroda, in a speech, said they could cut the deposit rate further. Commodity-sensitive currencies were the big underperformers yesterday and remained soft overnight, while Sterling tumbled over 1% as investors reacted to the latest Brexit referendum poll and today’s looming Budget. On the latter, an ORB poll conducted for the Telegraph newspaper showed that voting is tight, but the number of votes for the leave campaign slightly outweighed the stay campaign at 49% vs. 47%. However interestingly the same poll also showed that, accounting for the likelihood of voting being taken into account, the leave campaign actually rose to 52% versus 45% to remain. Cable remains weak and is on session lows as London walks in. The dollar generally better bid. With regards to today’s UK 2016 Budget release from Chancellor Osborne (due at 12.30pm GMT) markets expect the Office for Budget Responsibility to cut its forecast for growth by one or two tenths. This, along with a poorer outturn for the current fiscal year, would push the deficit higher in the absence of further tightening measures. Taking a look at the day ahead now then, where this morning in Europe the bulk of the attention will be on the UK where we will first receive the latest employment report (no change in the unemployment rate expected) followed thereafter by the release of the Budget. This afternoon in the US, its another busy session with the most notable release being the February CPI report where currently expectations are running for -0.2% mom at the headline and +0.2% mom at the core. February housing starts and building permits data is due at the same time, before the February industrial production (-0.3% mom expected), capacity utilization and manufacturing data is released. Of course this is all before the main event tonight with the conclusion of the March FOMC meeting, the outcome of which we will know at 6.00pm GMT with Fed Chair Yellen due to speak shortly after. Good luck..