Fundamental Analysis by Alpari

[Alpari]

Alpari: Fundamental Analysis

Brent to Trade $47.90-48.35 per Barrel Tuesday

The price of oil fell yesterday, with Brent dropping to $47.83 per barrel. The price of oil is rebounding Tuesday morning, with Brent up to $48.07 (around +1%). WTI futures with October delivery are going for $44.71 (down by over 2%).

There are many rumors going around the market about the oil market fall on Monday evening. Some believe that sales were provoked by the chief of Rosneft, Igor Sechin, who announced that Russia doesn’t intend to become a member of OPEC. There’s nothing new in this: Moscow never had any plans to do so and such an offer hardly interests the Russians due to the significant differences in the extraction schemes and parameters.

A combination of factors needs to be addressed. Firstly, last night the market was thin due to a lack of American participants (off for Labor Day). Secondly, trade participants are put off by the worsening situation in China with regards to the country’s 2015 GDP. The forecast was dropped to 7.3% from 7.4%. China has already made a comment today about how the period of market turbulence has passed, the yuan is stable and things are on the mend. Oil has become more expensive due to this.

Chinese statistical data bears significance for the commodities’ markets and is due to be out this week; an inflation report being of particular note. In addition, the market is standardly responsive to reports on oil reserves.

Brent will trade $47.90-48.35 today. For the meanwhile, there’s no reason to suppose that we’ll see a real rise in quotes.

Anna Bodrova, Alpari Analyst

 

[Alpari]

Alpari: Fundamental Analysis

Brent to Trade $47.10-48.55 Tuesday

World oil prices have resumed their growth. A barrel of Brent on October contracts now costs $47.68 (+0.7%). WTI futures with October delivery are trading around $44.80 (+0.9%). Ever since the market has taken the weak Chinese data into account, investor mood has perked up. Now we’re looking to the US Fed meeting and before it market activity will slow, whereas afterwards we can expect volatility.

Today API is publishing oil reserve numbers and tomorrow the EIA’s version will see the light of day. The consensus with regards to the forecast is showing that reserves will remain as they were last week. However, if the real data differs from the forecasts and the reserves are up for the third week in a row, we can expect to see oil markets falling again.
A barrel of Brent on Tuesday will trade in the $47.10-48.55 range. Sharp fluctuations should start on Wednesday evening and continue throughout Thursday.

Anna Bodrova, senior Alpari analyst

 

[Alpari]

Alpari: Fundamental Analysis

Brent on Wednesday to Trade $47-48.5 Before Fed Data is Published

Oil prices this morning are suffering a little, but Brent seems to be holding well around $48, allowing us to talk about bull dominance. Yesterday saw data from the API out. It indicated a decline in US oil reserves by 3.1 million barrels against a forecasted 0.2 million fall. The same report from the EIA is out later today and a consensus in the forecasts doesn’t propose that there’ll be much change in comparison with the figures of last week. It’s unlikely that there’ll be any reaction to the statistics; as the Fed Reserve convenes to make its decision, market participants are exercising caution. Brent on Wednesday is going to be stuck in a $47-48.5 corridor, but only until news from the Fed comes out. WTI is looking to trade $43-46 per barrel.

Anna Bodrova, senior Alpari analyst

 

[Alpari]

Alpari: Fundamental Analysis

Oil Prices Up Slightly

On Wednesday the cost of oil was up 4%. US oil reserve reports have pushed traders into closing short positions and purchasing oil futures. Brent has risen to 50 USD per barrel, with WTI up to 47.93 USD.
According to EIA data, US oil reserves last week were down by 2.1 million barrels against a forecasted rise of 1.173 million barrels. US oil extraction has fallen by 18,000 barrels to 9.117 million barrels.
Brent at 11:13 EET was going for 49.64 USD and WTI was being sold for 47.31. In Europe quotes were down slightly before the FOMC decision is made public.
Market participants have been selling the USD, expecting the Fed to leave rates unchanged. We’ll find out what the situation is at 21:00 EET. If the Fed leaves its rates at 0.00-0.25%, oil will head northbound to 31st August’s maximum of 54.32 due to the US dollar weakening.

Vladislav Antonov, Analis Alpari

 

[Alpari]

Alpari: Fundamental Analysis

Tsipras’ SYRIZA Leads the Pack in Greek Elections

Yesterday elections for Greek parliament took place for the second time this year. After the counting of half of the votes cast, Alexis Tsipras’s SYRIZA party are looking like they’ll hang on to power with 35.54% of the votes. The party could take 145 of 300 parliamentary seats. The closest rival to SYRIZA at this stage is the New Democracy party which has received 28.7% of votes and could end up with 75 seats.

The Independent Greeks, a party which shares SYRIZA’s political stance has gained some seats with 3.7% of votes according to preliminary calculations. More than likely, Tsipras will have to create a coalition with this party.

On the whole, the results were what were predicted with Tsipras, despite the deal made with European creditors, remaining the most popular parliamentarian in the country. The political line is still the same: he still needs to push ahead the serious reforms needed with regards to pensions and taxation, as well as the privatization and restructuring of banking systems. He also needs to lessen the country’s debt burden with write-offs, something, so far, his European partners have not agreed to.

Darya Zhelannova, Deputy director of Alpari's analytical department

 

[Alpari]

Alpari: Fundamental Analysis

Brent to Trade Around $48.5 per Barrel Today

Monday is seeing oil prices on the rise. A revival of oil quotes has been caused by data from Baker Hughes. The last report from the company indicated that the number of extraction rigs last week was down by 8 to 842. Brent on November contracts reacted to this by lifting above 47.5 dollars per barrel with WTI reaching 45.5 dollars.

Another positive for oil investors has come from an OPEC report in which the organization says it expects oil prices to rise by $5 per barrel over the course of a few years. According to OPEC, the cause for this growth in prices will come from a fall in US output. However, it’s quite difficult in the current conditions to make long-term forecasts; not excluding the cartel changing its tune in the next few years.

Oil quotes are likely to show growth throughout the week. Today’s Brent target is $48.5, with WTI $46 per barrel.

Anna Kokoreva, Alpari analyst

 

[Alpari]

Alpari: Fundamental Analysis

Brent Trading $50.2


At the end of the week, oil growth is weak. Brent on November contracts is trading slightly above yesterday’s closing price; at $50.2. WTI with November delivery is up a little more and is stood at around $47 per barrel. Growth in the quotes is being held back by negative oil reserve stats from the US. According to the EIA, last week’s oil reserves were up by 7.562 million barrels.

Nevertheless, the bulls still have the market. Oil extraction data is supporting the price of oil: the States saw a decrease in extraction last week of 76,000 barrels per day to 9.096 million barrels. Expectations for Baker Hughes stats are also keeping the price up and these factors are due to maintain a rise for oil until the end of the day.

In the medium-term, what the US Fed plans to do with its interest rates is set to affect the oil market. The longer they pore over the decision, the more likely we are to see a rise in oil prices. A few FOMC members spoke this week and from what they said, we have the impression that they can’t come to a unanimous decision. The majority of the commission members are more inclined to thinking that it is too early to put up rates right now.

We believe that growth will gather pace towards the end of the day due to statistics. China will set the tone for next week’s prices, with a special OPEC meeting on 21st October, 2015 also set to have an impact.

Anna Kokoreva, Alpari

 

[Alpari]

Chinese GDP Down to Minimum Since 2009


China’s GDP in Q3 of 2015 has slowed to 6.9% and as such is the worst it has been since March 2009. In Q1 and Q2 of this year the economic growth for the country stood just above 7% YoY. However, in Q3 the expectations has been set at 6.8%.

Industrial manufacturing growth in September was down to 5.7% from August’s 6.1% YoY. The indicator was expected to be at 6%.

The Chinese authorities are yet to panic despite the slowing of growth, believing the country’s economy is in a decent state of being. Although, this fall in the Chinese growth rate is causing many throughout the globe to become anxious; in particular, weak Chinese stats will put pressure on the commodities markets. There is not too much reason to be pessimistic, however. The slowing of growth in the Far East is due to weak growth throughout the world as a whole, partly as a cause of internal restructuring.

The Chinese government has actively supported their economy, repeatedly dropping rates and pumping in liquidity. If Q4 will be a lucky one, or at least more so than Q3, it’s possible that China’s 2015 growth could be set at 7% as the government had initially planned for.

Darya Zhelannova, Alpari

 

[Alpari]

Saudi Arabian Oil Reserves at Maximum Since 2002


Saudi Arabia has built up its commercial oil reserves to 326.6 million barrels as of August this year. This is the largest amount for the previous 13 years. At the same time, oil exports from the Saudi Kingdom are down: in July they stood at 7.28 million barrels per day and in August they were a meagre 7 million barrels per day.

The data demonstrates how Riyadh’s strategy of holding back the oil filled flood gates from the market is not really having the desired effect. This build-up of commercial reserves has led to the oversupply of oil on the market, in turn leading to a fall in prices. As a result, exports of oil have fallen. Extraction has gradually begun to fall. In July, Saudi Arabia drilled 10.36 million barrels per day, 10.27 million in August and 10.23 million barrels in September. We reckon that low demand for oil, coupled with low prices will lead to further decreases in Saudi drilling and exports.


Anna Kokoreva, Alpari

 

[Alpari]

Brent Down to $47 per Barrel

Tuesday is seeing a continuation of the fall in oil prices. Brent and WTI are trading close to their supports at $47 and $43.4 respectively. Pressure on oil quotes is compounding before US reserve data comes out and the Fed meeting concludes.

By the end of the week before last, US reserves were up according to the American Institute for Oil and the EIA. Investors are presuming that the increase has continued and that reserves are too high, putting pressure on prices. Nevertheless, for the support to be broken, more than negative stats are necessary.

However, speculators are waiting for the results of the FOMC meeting and their conclusions on what to do with the US interest rate. If the rate is increased, the dollar will strengthen and down the price of oil. As we see things, it’s unlikely that they’ll increase the rate, but in any case, the slight chance that they might is piling pressure on quotes. If they do increase the rate, we will see the price of oil take a real hit.

Pressure on the price of oil will rise towards the end of today, but the price is unlikely to surpass the supports.

Anna Kokoreva, Alpari

 

[Alpari]

Gold Deficit Nearing​

Never before in modern history have central banks gone all out en masse with negative interest rates. First the US, then the Japanese, then the ECB, Swiss, English and then the Chinese joined the party; all trying to rear back inflation under control; throwing out the rule book and reopening the text books to get financial markets moving. As a result, yields on bonds worth over $6 trillion have headed negative. It is unsurprising that investor capital has run for precious metals.

At the European Central Bank’s 10th March meeting there were some radical monetary policy measures introduced to stimulate the economy: they dropped the base rate from 0.05% to zero and set the interest rate for deposits at minus 0.4%. The monthly asset purchasing program was increased from 60 to 80 billion euros, thereby increasing the money in circulation on the market. So what was gold’s reaction? A thirteen-month maximum against the dollar and a five-year maximum against the euro.

The price of gold correlates with the regulators’ interest rates, but not exactly as seems at first glance. To get a good idea, we need to take consider the US Fed’s rates. In theory, tightening monetary policy means increased yield on instruments on the stock market and leads to capital fleeing the gold market. Furthermore, a rise in interest rates theoretically leads to a strengthening of the dollar, meaning a fall in the price of gold as it is the currency in which the metal is sold.

The historical data tells us the opposite though. From 1970 to 1980, the Fed rate rose from 4% to 20%. In the same period, gold rocketed from $35 to $675 per ounce. Another example: before the period of financial crisis from 2003 to 2006, the federal fund interest rate increased from 1% to 5.5%. Gold quotes during this period reacted by growing from $355 to $650.

But a rise in interest rates from the Fed does not mean a rise in gold prices: it actually holds the price back. In both circumstances above, the rise in interest rates was preceded by inflation. Real negative interest rates in the States (federal fund rate minus CPI) have practically forever led to a new price maximum for gold.

In this there is nothing surprising since a widespread fall in interest rates in different countries has a positive effect on the price of precious metals. If we take into account the fact that the Fed, based on the Phillips curve, is trying to stimulate inflation, we receive a factor which is possible to support gold price growth over a sustained period of time.

The higher the price of gold, the stronger it will stand on its own two feet in light of the avalanche of demand which follows rises in gold prices. A fall of the stock market indices, negative interest rates for deposits, meagre growth of the world economy, in addition to rising political tensions have forced investors to search for a safe haven which has come in the form of gold.

So, as the purchases of precious metals gather pace with new players, the higher the price will rise for gold and silver. The situation will escalate when gold traded on the stock market in paper form begins to exceed the physical amount available.

So there is a precursor for a technical default. It wasn’t so long ago that COMEX, the largest precious metals market in the world, saw its reserves of accessible gold for immediate delivery fall by 73% due to a single and unexpected withdrawal. As such, at the end of January 2016, 99.81% of tradeable futures ended up unsecured by physical metal.

Now let's not forget about the central banks buying up record amounts of gold over the last eight years and joining the gold rush with the other market participants. Taking into account that the diverging demand and supply on the market (gold production in 2015 fell 4%, whilst demand rose by 4%), in addition to the modest size of global markets of physical gold and silver, we could well see a deficit come about.

Alpari

 

[arbtrader]

In Australia, surveys on manufacturing, inflation and building approval data are to be released on Monday.
In the week ahead, investors will be looking ahead to Central bank announcements in Australia and U.K. Also Friday’s U.S. employment can indicate the strength of the economy for the rate decisions.

 

[Alpari]

Evening Euro Target: 1.1260​

For the past twenty six hours the difference between pairs heading the same way has reduced. The euro/dollar is up 48 points: from 1.1179 to 1.1227. The pound/dollar is down 113 points: from 1.4663 to 1.4550. The spread between the pairs has reduced due to a revival of the euro/pound cross. European stats have nudged the euro up.

In the UK, industrial orders in May were down 8 points against a 13 point forecasted fall and a previous 11 point fall. The surplus on current Eurozone operations has risen to 27.3 billion euros against a forecasted 19.6 billion euros and a previous 19.2 billion euros. Without taking seasonal fluctuations into account, the surplus increased to 32.3 billion against 11.2 billion euros in February.

The evening will see Chinese and US data out. Canadian CPI and US secondary market housing sales could cause short-lasting fluctuations on the market before the weekend.

We can see that the euro/dollar needs to rise to 1.1250-1.1260 and the pound/dollar needs to fall to 1.4490-1.4508. In this case the pairs will be balanced at these levels. On Monday the rates will stand still at the levels reached and on Tuesday the dollar could continue its rally against all currencies.

 

[Alpari]

Interest Rates an Unmoveable Boulder​

World currencies last week were travelling in different directions. The euro was down 0.1% against the dollar as part of a correction and because of the looming Brexit referendum. The pound was up against the dollar by 0.6%. JPY was the winner in growth terms for developed countries with a 2% rise. The Chinese yuan was unchanged.

Last week’s main event was the US Fed leaving rates unchanged. Yellen explained this by blaming outside factors; Chinese slowdown, Brexit and a slow in developed countries’ growth. Nevertheless, Yellen warned we will probably see a rise before the year’s end.

Retail sales in May in the US were up 0.5%, upping forecasts by 0.2% but way below April’s 1.2%: showing reason for Yellen’s caution. Industrial production in May was down to 0.4% and the CPI YoY rose by 1% in the country, all defying expectations but in different directions. In any case, the market took this as negative for the dollar.

The Bank of England also kept things unchanged. The Brits are doing well in steering the country out of the economic crisis, although problems still persist. The county’s May CPI was 1.2% YoY, PMI: 0.5% (both being slightly below expectations). Retail sales for the month were up 6% (forecasted: 4%), with a MoM 0.9% rise.

The data shows the strength of the British economy and indicates that the reality of a Brexit may not be so grim as the majority of the British establishment is making out. The stats helped the pound, but with the referendum three days away, expect market volatility.

Eurozone April manufacturing rose 2% YoY (forecasted: 1.3%), whereas the CPI in May fell 0.1% YoY. However, it was up MoM by 0.4% and this was 0.1% more than expected. However the market ignored the positives.

Japan’s central bank also didn’t buck the trend with their interest rates, leaving them as was (-0.1%). At the same time, April industrial production fell 3.3% YoY; indicating a a slowing in the fall and therefore taken optimistically by the market.

Whatever the UK referendum choice is, this week will be a historic one for Europe.

Calendar of events for this week

Tuesday (21st June), ECB’s Draghi (16:00 EET) and Fed’s Yellen (17:00 EET) to speak.

Wednesday (22nd June), ECB meeting (10:00 EET) and Yellen to comment (17:00 EET).

Thursday (23rd June), UK Brexit referendum.

Forecast

We expect to see the euro/dollar at 1.11-1.13 this week, with the pair’s movements dependent on that of the Brexit referendum outcome. The GBP/USD could fluctuate in a 1.40-1.44 range with this pair even more dependent on the referendum outcome and volatility being even higher.

 

[Alpari]

All Eyes on UK Referendum​

There’s nothing really new happening on the oil market, with the price still hovering around the $50 mark. Don't forget that the API’s Tuesday oil report showed a 5.224 million barrel fall in oil reserves and Wednesday’s report from the EIA showed a fall of 0.917 million barrels, with it expected to fall by 1.671 million. As a result, after a growth to $51.20, yesterday saw a sharp fall to $49.15, finishing the day at $49.80. Oil trading on Thursday started with a slight rise, with prices this morning in a $50.10 - $50.35 range.

The majority of Asian stock markets, excluding the Chinese, have risen this morning. The Nikkei 225 rose by 0.76%. The ASX Australia was up 0.2%. The Shanghai Composite rose by 0.8%, and the Hang Seng increased by 0.2%. Futures for the S&P500 were trading at 2087; 0.5% up on the previous trading day.

The UK is holding its referendum on whether to remain in the EU today and the results of it will set the tone for currency movements on world markets. The most recent survey published yesterday showed a small tip in favour of those wishing to remain: 51% against the leavers 49%. This data offered some support to the pound and euro. The EUR/USD after yesterday’s rise from 1.1240 to 1.1300 has continued its growth on Thursday morning to 1.1340. The exit polls for the Brexit vote will be out over the next 24 hours and it will become clear what the results are.

 

[Alpari]

Brazilian Real Outshines Emerging Economies’ Currency​

Between 20th and 22nd June the currencies of developing countries continued to rise against the dollar. However, the rapid growth of last week has slowed.

The clear leader for the period indicated above was the Brazilian real (+2.33%). The Mexican peso rose by almost a full percentage point (0.92%), whilst the South African rand also rose by some margin (0.6%).

The head of Brazil’s lower parliamentary house, Eduardo Cunha (the initiator of the impeachment against former president Rousseff) has had his position of lower house speaker stripped from him by the high court of the country due to corruption charges being brought against him. The news was perceived as positive by the market; a signal that the country may well see an end to the ongoing political infighting and a restoral of stability. Furthermore, inflation during the first half of June rose by just 0.4% YoY whilst there was a rise over the previous fortnight of 0.9%. This has all facilitated a rise in the value of the real against the dollar.

South African consumer inflation data for May came out recently. The CPI rose 6.1% YoY and 0.2% MoM (previous: 0.8% MoM). This was positive news for the rand.

In Mexico there has been a reshuffle amongst the leaders of opposition political parties due to pressure which has come from protests (teacher strikes and demonstrations due to proposed education reforms). This has opened up the road for party powers to conduct direct dialogue with the protestors and bring about reforms to the educational system. We reckon that the market perceived this as positive news and thereby this facilitated a rise in the rate of the peso against the dollar.

In Turkey the central bank took the decision to leave the interest rate unchanged at 7.5%. The data signalises a lack of needing to implement economic stimulus in the country and is seen as positive for the lira.

The business sentiment index from MNI has come out in China. The index is calculated monthly and based on surveys conducted amongst business leaders (private companies listed on the stock market) and reflects business confidence regarding macro-economic stability and the conditions in which business takes place in China. The index saw an increase from 50 to 54.5 points, indicating a rise in business trust in the government’s macro-economic policies. The data has had quite a positive effect on the yuan.

Significant economic data has been in deficit in India over the last two days. A fall in the rate of the rupee against the dollar is linked to the fact that, two days ago, several states in eastern India witnessed torrential rains and mudslides, causing the deaths of almost 100 people. The sombre mood and mourning in the country has been reflected by the nation’s currency rate.

Calendar of future events

Thursday, 23rd June – Mexican inflation data for the first half of June.

Friday, 24th June – Mexican retail sales in April and Brazilian balance of payments in May.

Monday, 27th June – producer price index in May for South Africa.

Forecast

The Brazilian real is likely to be in a 3.35-3.38 corridor against the dollar. The Mexican peso could fluctuate in a 18.4-18.5 per dollar range.

 

[Alpari]

Britons Brexit​

Against all odds, the UK has voted 52% to 48% to leave the EU. The market followed to this news of Brexit with safe haven assets up and risky ones down. This was bad news for oil since it is likely to lead to a slowing of the world economy and a reduction in oil demand. Brent crumbled from $51.15 to $47.60 per barrel. Conversely, gold rose up from $1,250 to $1,350 per troy ounce.

Brexit has hit the stock market hard. The Nikkei 225 fell by 8.0%. The ASX Australia was down 3.4%. The Shanghai Composite fell by 1.7%, and the Hang Seng increased by 4.8%. Futures for the S&P500 were trading at 2002; 4.5% down on the previous trading day.

A sharp rise in the dollar against almost all of the major currencies of the world has followed the referendum results. The EUR/USD fell from 1.1420 to 1.0910. The GBP/USD fell from 1.5010 to 1.3230, thereby updating a thirty-year minimum.

 

[Alpari]

Market Still Correcting​

Prices of oil are continuing to restore and this is not only being facilitated by falling US oil reserves, but also a rethink of the Brexit referendum’s consequences. Data from the EIA on Wednesday showed that oil had fallen more than expected (down 4.053 million barrels against an expected 2.375 million barrel fall). As for the Brexit, the first reaction to the referendum on commodity markets, excluding gold, but including oil, was a fall due to the rise in likelihood of a slowing of growth in the global economy. However, with a few days passed, it’s become clear that the rise in risk will hinder a rise in Fed rates in the coming time, and this is already a factor which is supporting oil and other commodities, in addition to stock markets. Brent oil closed above the key $50 marker yesterday; heading from $48.7 to $50.1 over the course of the day. Oil this morning has been trading in a $50.7 - $50.9 range.

Thanks to the probability of a US tightening of monetary policy drifting further into the future, the majority of world stock markets are continuing their rise. The Asian markets aren’t an exception this morning, other than China. The Nikkei 225 rose by 0.4%. The ASX Australia lifted 1.7%. The Shanghai Composite fell by 0.2%, and the Hang Seng increased by 1.4%. Futures for the S&P500 were trading at 2062; 0.2% up on the previous trading day.

The outlook for the global economy is still unclear, the Brexit has led to fluctuations on the stock markets, but the government of Hong Kong is already fully ready for this, as noted by Leung Chun-ying – the head of the government there – when making a speech at an event dedicated to the 16th anniversary of the opening of the Hong Kong stock exchange. Leung Chun-ying said that the Hong Kong administration will do everything in its power to provide enough market liquidity and preserve stability of currency rates and interest rates. The executive director of the Hong Kong stock exchange, Li Xiaojia, noted that the Brexit outcome will continue to affect market stability, with its effects becoming more notable. However the Hong Kong economy has sturdy foundations, with the Hong Kong government working together with the stock market there to secure the smooth running of stock markets.

The USD was trading slightly up against the yuan at 6.6440 (+0.0072 or +0.11%).

After three days of positions lost during the UK referendum restoring, the EUR/USD fell during the Asian session. After a growth yesterday from 1.1060 to 1.1120, the pair today has fallen to 1.1090. The further from the referendum we get, the less volatility we’ll see. This will continue, at the very least, whilst there is still a lack of clarity about the UK leaving the EU. Today the EU is publishing preliminary June inflation data. It’s expected that the CPI is unchanged YoY, whilst the base CPI will have risen by 0.8% in this time.

 

[Alpari]

China Injects Capital into Financial Markets​

The price of oil on Friday dropped to $49.25 per barrel of Brent, although it finished the day at around $50.60. Support for oil came from a US oil rig report which showed active rigs up for the week from 330 to 341. Monday morning has seen oil trading stably in a narrow corridor of $50.3-$50.5; slightly below last week’s closing price.

The stock markets are up after a rethink of when the Fed is likely to increase interest rates which has shifted to an undetermined time in the future due to the Brexit referendum. The stock markets are on the up, though. The Nikkei 225 rose by 0.6%. The ASX Australia was up 0.3%. The Shanghai Composite rose by 1.8%, and the Hang Seng increased by 1.5%. Futures for the S&P500 were trading at 2099; 0.1% up on the previous trading day.

Last week the People’s Bank of China injected 840 billion yuan (129 billion USD) into the financial market to increase liquidity. As such, on Thursday and Friday the central bank conducted seven-day reverse repos (purchasing securities which must be sold back at a fixed price) to the tune of 50 billion and 130 billion yuan respectively. The interest rate for reverse repos on these two days was 2.25%, with this rate being valid for the two previous capital injections made by the central bank of 210 (Wednesday) and 180 billion yuan (Tuesday). On Monday the bank injected 270 billion yuan into the financial market.

The USD was trading slightly up against the yuan at 6.6623 (+0.0026 or +0.04%).

Last week, volatility for the EUR/USD was quite high and in favour of the euro. Throughout the day the pair lifted from 1.1070 to 1.1170 and completed the week at 1.1140. There’s no point expecting much activity today as it is Independence Day in the US. There’s just a Eurozone May PMI out which is expected to rise by 0.3% MoM whilst falling 4.1% YoY.

 

[Alpari]

Oil Sticking at $50​

Oil again didn’t manage to strengthen above $50. It spent the best part of yesterday trading in a $50.3 – $50.7 range per barrel of Brent. However, in the evening the price began to fall and by Tuesday morning it had dropped to $49.55. It’s most likely that oil was reacting to world stock markets switching from growth to correction.

The majority of Asian stock markets have met Tuesday in the red zone. The Nikkei 225 fell by 0.9%. The ASX Australia was down 1.0%. The Shanghai Composite rose by 0.5%, and the Hang Seng lost 0.8%. Futures for the S&P500 were trading at 2093; 0.2% down on the previous trading day.

The Chinese central bank announced that it will use various instruments to support an optimal volume of liquidity and that of credit and societal borrowing. The People’s Bank of China will continue with its reserved monetary policy: simultaneously preserving neither an approach that is too lax, nor one that is to firm. The regulator made this clear in an announcement published after a currency policy meeting for Q2. The central bank will improve financing and credit structures, increasing the share of direct financing, whilst lowering the cost of societal borrowing.

The USD was trading slightly up against the yuan at 6.6692 (+0.0039 or +0.06%).

Yesterday’s May EU producer price index was higher (in the current deflationary climate: better) than expected. PPI MoM rose 0.6% (expected: 0.3%), down 3.9% YoY (expected: 4.1%). These stats offered temporary support to the EUR/USD which strengthened from 1.1100 to 1.1160, but there wasn’t much optimism for long as by Tuesday morning the rate had dropped to 1.1130. Today will see Europe publish business activity indices for the service sector in June and the Bank of England’s Mark Carney will speak after a report on financial stability in the UK. The US will see stats for May manufacturing orders and by the end of the day the Fed’s Dudley will speak.