Inflation holds steady in Dubai in March

Inflation in Dubai held near unchanged in March at 3.3% y/y. Food costs were up by 3.1% in March while housing inflation accelerated to 6.3% y/y. Insurance and financial services also showed a strong pick up of 8.7% y/y though it has come lower from more than 13% recorded in January this year. Inflation has been holding near 3.3-3.5% for the last five months in Dubai with housing contributing to much of the gains. On a monthly basis, inflation was up 0.2% m/m in March.

Inflation in the UK ticked lower in March to 3.2% y/y from 3.4% in February, slightly ahead of market estimates. Core inflation showed a more substantial drop to 4.2% in March from 4.5% a month earlier. On a monthly basis inflation was up 0.6% in March, holding its pace from February. Services inflation in the UK remains quite high at 6% and wage data has so far not decelerated substantially. Bank of England governor Andrew Bailey noted that there was “strong evidence” of prices easing in the UK and that the economy was not enduring the same kind of “demand-led” inflation seen in the US. Markets are pricing in a 25bps cut for the Bank of England in September this year.

Today’s Economic Data and Events

• 16:30 US Initial jobless claims Apr 13: forecast 215k
• 18:00 US Existing home sales Mar: forecast 4.2m

Fixed Income

• US Treasuries pulled higher overnight with the 2yr UST yield down 6bps at 4.9321% and the 10yr yield down 8bps to 4.5873%.
• Bond markets closed a little softer overnight though high-yield and emerging market bonds edged higher. GCC bonds largely closed higher.
• Neom is planning an initial sukuk issue for later this year according to press reports. The level may be as much as SAR 5bn to be raised in local markets.

FX

• The US dollar snapped its recent string of gains with all peer currencies moving higher against the greenback. EURUSD added 0.5% overnight to close at 1.0673 while GBPUSD edged up by 0.2% to 1.2454. USDJPY remains at elevated levels but overnight and today the yen is pulling stronger against the US dollar.
• Commodity currencies also snapped back some losses from earlier in the week. USDCAD dropped by 0.4% to 1.3773 while AUDUSD moved up 0.5% to 0.6435 and NZDUSD added 0.6% to 0.5917.

Equities

• Equity markets had a mixed close overnight with US markets generally weaker. The Dow Jones ended the day down 0.1% while the S&P 500 closed lower by 0.6% and the NASDAQ fell 1.1%. By contrast the FTSE 100 managed to pull higher by almost 0.4% and there were moves higher across French and German equity markets.
• Asian markets are tentatively in the green in early trading today.
• Regional markets closed weaker overnight. The DFM fell by 0.3% while the ADX closed down by nearly 0.5%. The Tadawul dropped by 0.3%.

Commodities

• Oil prices recorded a sharp drop overnight with Brent futures down 3% to USD 87.29/b and WTI off by 3% to USD 82.69/b. That was the largest single-day drop for Brent since the start of February. The catalyst for the move seems to have been a stockbuild reported by the EIA of 2.7m bbl of commercial crude inventories while both gasoline and distillate inventories were lower. US oil production was unchanged at 13.1m b/d while product supplied was flat.