Market Commentary

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Yen drops on intervention rumors, Dollar surges as Fed Dudley is optimistic on Rate hikes

Japanese yen dropped to a two weeks low against the dollar on Monday after Japan’s Finance Minister warned that Tokyo is ready to intervene in the foreign exchange market if necessary.

USD/JPY hit 108.38, highest level from April 28, and swayed around near 108.20 during Monday session, up 1.03% for the day. Last week, the dollar fell to 105.05 level, 18-month low against the Japanese Yen .

The USD index, which tracks the US currency against the changes of trade-weighted basket of six major currencies, rose by 0.14 percent to 93.96, bouncing off from lows Friday of 93.00 floor.

The Finance Minister Taro Aso hit the wires on Monday saying that Tokyo was ready to intervene in the foreign exchange market, if excessive strengthening of Yen will affect trade statistics and economic indicators of the country.

Though, most traders still don’t expect monetary measures by Japanese authorities towards weakening of the yen.

At the end of last month the Treasury United States added Japan to the list of countries which are monitored for the policy of adjusting foreign exchange rates. It means that United States are worried about current monetary stance of BoJ and Japanese government, which lack of action or overly interventions may create problems on foreign exchange market.

In his report, the Minister of Finance noted that the current market of US Dollar – Japanese Yen is “well regulated ” and reiterated that all countries should abide by the commitments of the G20 and G7 on exchange rate policies. Markets saw in this statement a call for limiting currency intervention on the part of Japans government.

The yen strengthened after the outcome of the April meeting on determining monetary policy, where Bank of Japan refrained from implementing fresh quantitative easing, contrary to market expectations.

The strengthening of yen threatens the goals of BoJ to stimulate prices growth.

A demand for US dollar also rose after the head of Fed Reserve Bank in New York William Dudley said in Friday that it is reasonable to expect two more rate hikes this year, despite data showing that the growth in the number of new jobs in the United States in April was the lowest in the past seven months.

The yen also fell sharply against the euro, the EUR/JPY pair rose 1.05 percent to 123.43.

The single currency hardly changed against the dollar, the EUR/USD traded near key 1.14 level. Risk sentiments among EU investors and analysts have improved slightly in May, data showed on Monday, but worries about the prospects of the world economy continue to mount pressure.

Investor confidence index grew 1.2% from 5.7 to 6.2 in April, beating expectations of the growth to 6.1.

A separate account showed that in March the volume of orders in German industry rose more than forecast, at 1.9%, showing the largest increase since June due to high international demand.

 

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Gold retreat from bounce, Oil prices surge on upbeat EIA and supply outage in Nigeria

Oil prices rose on Wednesday amid the return of worries about supply outages as Shell announced the closing of a key pipeline in Nigeria.

Brent futures strengthened 4 percents to $ 47.34 per barrel, WTI futures rose 3.45 percent to $ 46.20 per barrel.

Shell Petroleum Development Co., a unit of Royal Dutch Shell in Nigeria, announced force majeure associated with Bonny Light oil exports, after the closure of the pipeline Nembe Creek Trunk line (NCTL) for repairs.

In this regard, the country‘s oil production could fall to a minimum of more than twenty years.

News from Nigeria have changed the trend of oil price which declined earlier in the session, as the production in Canadian oil sands region started to recover from outages related to forest fires.

The energy information Administration (EIA) of the United States reported an unexpected fall in crude inventories last week, surprising analysts, which projected growth.

According to the EIA, crude oil reserves declined in the week ending on May 6, by 3.41 million barrels to 539.9 million barrels, while analysts were expecting a growth by 0.71 million barrels.

According to the American Petroleum Institute (API) published in Tuesday, stocks in the United States increased by 3.45 million barrels to 543.1 million for the week ending May 6, whereas analysts had assumed that they grow up to 714,000 barrels.

Gold price bounced from a two-week lows on Wednesday, as the dollar rally was interrupted, while European shares fell, stoking investors ‘ appetite for the precious metal.

The dollar fell to 0.3 percent against a basket of major currencies.
Analysts consider the level of $ 1,300 per ounce as a price ceiling in the short term because the metal has already increased by 20 percent since the beginning of the year due to the strengthening of the commodity market and cooling expectations of FED rate hike in the United States in June.

Gold is supported mainly by traders‘ expectations that the next increase in interest rates will only happen later this year, because the FED is mindful of the difficult global economic environment.

The current situation is favorable for gold, but its hard to call it too favorable as the economy of the United States proved to be generally in good shape.

Goldman Sachs also sees limited growth potential of gold prices, given that the FED is unlikely to surprise by decline in rates, the dollar is almost nowhere more to fall and its hard for China to strengthen its currency so as to substantially weaken the dollar.
However, Goldman increased its price forecasts for gold on 3, 6 and 12 months to $1,200, $ 1.180 and $ 1,150 per ounce, respectively from $ 1,100, $ 1,050 and $ 1,000 per ounce, referring to the strong position of investors – speculators.

Source : Gold retreat from bounce, Oil prices surge on upbeat EIA and supply outage in Nigeria


Highligt

1. Oil prices rose on Wednesday amid the return of worries about supply outages as Shell announced the closing of a key pipeline in Nigeria.
2.According to the EIA, crude oil reserves declined in the week ending on May 6, by 3.41 million barrels to 539.9 million barrels, while analysts were expecting a growth by 0.71 million barrels.
3.
The dollar fell to 0.3 percent against a basket of major currencies.
4.Gold is supported mainly by traders‘ expectations that the next increase in interest rates will only happen later this year, because the FED is mindful of the difficult global economic environment.

 

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FOMC minutes sends rate hike odds to 34%, Dollar index surges to 7-week high


The situation about increasing of Federal Funds Rate in June continue to heats up – this time from very hawkish statement from Fed official from Richmond.

Fed Richmond President Jeffrey Lacker blamed markets on being too downbeat about the pause which Fed will take before another rate hike.

Lacker, known for his hawkish views, who is not a voting member this year of the FED, also told Bloomberg that he supported raising the rate at the April meeting and that it would be prudent to pick it up in March.
Of the members with voting rights, only the Fed President of the Kansas City Esther George disagreed with the rest of FOMC board, saying that she would prefer to raise the target rate range to 0.50% -0.75%.

Lacker added that there is “usual diversity of opinions”, but supposed there are strong fundamental grounds for raising borrowing costs in June.

His views is support by strong pickup in US labor market. For example the number of Americans requesting first-time unemployment benefit was reduced last week to 278 thousand from 294 thousand, showed the report of US labor department. The pace of decline in the number of applications have become the highest since early February this year.

Experts interviewed by Bloomberg, on average, had predicted a decrease in the number of applications last week to 19 thousand. Consensus forecast of the experts interviewed by MarketWatch, had anticipated a drop by 24 thousand.

A week earlier, the number of applications peaked in this year, and a significant decline is a signal that US labor market remains strong, experts say.

The average number of applications for the past four weeks, less volatile indicator, rose to 275.75 thous. with 268.25 thous. a week earlier.Meanwhile, the number of Americans who get unemployment benefits for the week ending 7 may, declined by 13 thousand – to 2.152 million. The figure for the previous week were revised to 2.165 million from 2.161 million.

As the rally of US Dollar extends, commodities and safe heavens suffer. In Thursday gold futures fell to a three-week low during morning American trades, as investors are trying to second-guess the likelihood FED rate increase in the next month.

Gold tumbled 1.71% to $1.252 per troy ounce, the steepest decline for recent months. The move looks like a pure speculation as rate hike odds are still low and Janet Yellen was too wary on her last meeting about the possibility of changes in June.

But April 26-27 FOMC minutes released on Wednesday showed that the Central Bank will likely increase rates in June if US economic data from second quarter will show show rising inflation and employment levels.

As of Thursday morning, federal funds futures indicate 34% probability of raising rates in June, compared to 16% before the release of the protocol.

The growing likelihood of a rate increase in June prompted the dollar to 7-week highs.

The USD index, which tracks the US currency against the dynamics of trade-weighted basket of six major competitors increased by 0.21% to 95.40, peak March 29.

A strong United States dollar usually puts pressure on gold, since it reduces the appeal of the metal as an alternative asset and makes dollar-priced goods more expensive for holders of other currencies.

Source : FOMC minutes sends rate hike odds to 34%, Dollar index surges to 7-week high

 

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Oil rallies on upbeat API estimate

The weekly API report released on Tuesday gave a green light to Oil prices, showing commercial crude reserves in the US reduced by 5M barrels, dropping from historical records. The preliminary data shook up Oil traders, who expected to see a decrease of only 2.5M last week.

Both benchmarks climbed over the $49 level with a spread between WTI and Brent narrowing to 5 cents, WTI rose by 1.09% to 49.15, Brent gained 1.21% to 49.20. The prices are now stalling below the key $50 level, waiting for the official EIA verdict, which if confirmed will probably help prices to step over the $50 mark, first time since October 2015.



As crude production in Canada has idled due to wild fires in Alberta, the US is left without its main oil supplier, which is the main cause of such a surprising decline in commercial stockpiles last week. Canada, temporarily leaving the field, also helped to absorb the glut, bringing fundamental grounds in line with current price rally. Supplies from Nigeria fall due to armed actions in the country. The decline is estimated at 300K barrels/day, helping to ease oversupply concerns as well. The buoyancy will probably remain on the market till the June OPEC meeting in Vienna where the members will try to bring back the output freeze plan, which failed on the previous meeting due to disagreement between Saudi Arabia and Iran.

The USD index retreats slightly from two-month peak, declining by 0.07% to 95,52 level, though its unlikely to see further declines ahead of Yellen’s speech on Friday. The US figures on Advanced Goods Trade Balance, House Price Purchase Index and Fed’s Harker speech may trigger some volatility for the US currency.

USD/CAD trades nearly flat ahead of the BoC interest rate decision due today, declining by 0.08% at 1.3112. Gold extends its declines on low risk-aversion level and crude rally, equities are also on the rise, XAU/USD dropped by 0.40% at 1,224.30, DAX gained 1.33%, FTSE 100 advanced by 0.59%


Source : Oil rallies on upbeat API estimate

 

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EURUSD Into Next Week's ECB & NFP : Range and Outlook - BTMU
by : Lee Hardman, Currency Analyst | Bank of Tokyo Mitsubishi UFG

EURUSD - Bearish Bias (1.1050-1.1400)
The main US economic data releases in the week ahead will be the upcoming labour market updates for May
personal spending and deflator reports for April .
Stronger spending is expected in April and employment growth is expected to remain solid enough to justify a hike in the coming months.Fed Chair Yellen is alos scheduled to speak altough may not provide policy guidance in the week ahead.

The main focus in the week ahead for the Euro will be upcoming ECB Policy Meeting. We do not expect the meeting to prove market moving for the EURO as the ECB is comfortable to maintain its current pace of policy easing. The ECB will hold another TLTRO in June providing cheaper financing. Higher take up could weigh modestly on the EURO.

The reduced risk of BREXIT is providing limited to no support for the EURO

 

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Oil sticks near $50, shorts positions drop to June 2015 low


Oil prices fell to $49 area on Monday as Iraq increased target level of exports in anticipation of the OPEC meeting, while production in the Canadian oil sands region should recover from large-scale wildfires.

Attention turned to the OPEC meeting in Vienna this week, although most analysts do not expect any changes in the oil cartel.

Member countries could not agree on freezing production in an attempt to support prices while Iraq became another manufacturer in the Middle East which announced boosting export to 5 million b/day in June.



WTI Oil futures were traded at $ 49.29 a barrel, falling 0.1 percent at the close of London session.

Futures on Brent decreased 0.1 per cent to $ 49.27.

Impact on the quotes also had a strengthening US dollar on the background of rising expectations of an interest rate increase in the United States in the near future.

Crude short positions decreased to less than 60K in May versus 160K in the beginning of March when price was at $32/barrel, signaling markets make light of the possibility of collapse on the energy market:



However, trading volumes were limited due to public holidays in Britain and the United States, where Memorial Day, which is celebrated in Monday, is considered the beginning of the summer season, with rising demand on gasoline due to an increase in automotive traveling.

Vienna-based JBC Energy consulting company reported that global oil demand in the January-April 2016 year grew by 1.5 million barrels per day compared with the previous year, surpassing most forecasts thanks to strong consumption in the United States, China and India.

Oil production in the United States declined to a minimum since September 2014 year after the number of drilling rigs has dropped the ninth week of the last ten, despite the recent rally in oil prices.

Expected recovery of oil production in the Canadian oil sands region also had its pressure on WTI. Suncor Energy plans to increase production at its oil fields in Alberta this week after the suspension of works previously in may due to large forest fires.

Supply disruptions due to fires in Canada and unrest in Libya and Nigeria pushed oil to seven-months peaks in recent weeks.


Source : Market News and Analytics

 

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Gold dips to a $1,200 level, while greenback surges on Yellen

Japanese Yen breached a 111.00 level in Asian session on Monday. The currency erased gains from the surprising move of the Bank of Japan, which decided to abandon a round of QE at the end of April.

USD/JPY was as high as 111.45, receding to a nearly 111.00 mark. Positive retail sales reports released on Monday signalled consumption in Japan recovers.

Precious metals were also hit by greenback strengthening as investors damp low-yield assets chasing for higher gains. A losing streak on Gold was held up on a $1,201 level as the steep decline triggered a strong backlash from the bulls near the four-month low. The bullion bounced to $1,210 remaining under a threat of further selloff.

Palladium, Platinum and Silver also declined to the lows of April 8-10.

Yellen speech in Harvard last Friday didn’t have any news for markets, though cleared doubts on whether the Fed chair is in line with other board members about prospects of the US growth. Yellen reiterated that the rate hike in the coming month could be appropriate. USD index has soared to 95.00 after the speech but bounced off to 94.71 on Monday. Despite firming confidence in the possible rate hike in June, the probability of it decreased to 28.1%, reflecting low expectations of the rate hike priced on the markets.

Oil sticks to a 49.00 zone, though attempts to repeat the hike above the $50 mark are in vain. According to COT reports, Oil short wagers have contracted from 200K peak in February to only 60K in May, showing that pessimism in growth outlook is rapidly shrinking. The prospects of reaching output cap agreement are unclear, as stances of Iran and Saudi Arabia remain mixed on this matter. There were statements from Iran’s oil officials that the country is interested in orderly market, while Saudi Arabia heats competition refusing to curb the pace of drilling.

In the first quarter, France GDP (YoY) rose 1.4% vs. 1.3% projected improving outlook of the EU on the fight with deflation. European indices remain nearly unchanged and trade with reduced volatility due to bank holidays in the UK and US. Asian equities advance on weakening Yen helping exporters to boost profits as well as PBOC loosening its fixing of USD/CNY rate by 0.45%. Nikkei +1.39%, TOPIX +1.19%, Hang Seng +0.26%, CSI 300 +0.14%.

 

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Asian Stocks Rise Before U.S. Payrolls Data as Yen, Kiwi Gain

Asian equities rose and the Japanese yen climbed toward a three-week high before U.S. jobs data that will shape expectations for the timing of the Federal Reserve’s next interest-rate hike. New Zealand’s dollar strengthened and Brent crude traded near $50 a barrel.

Stocks

The MSCI Asia Pacific Index was up 0.2 percent as of 1:50 p.m. Tokyo time. Benchmarks in Hong Kong, Singapore and Indonesia climbed to one-month highs, while those in India and Thailand were headed for their best closes since at least October. The Shanghai Composite Index was set for its first weekly gain in more than a month. Japan’s Topix lost 1.4 percent this week as Prime Minister Shinzo Abe failed to provide details of a fiscal stimulus package when he announced a delay to a sales-tax increase.

Noble Group Ltd. tumbled 13 percent in Singapore after the commodities trader announced a rights issue to raise about $500 million at a 63 percent discount to Thursday’s close.

Currencies

The yen rose 0.3 percent versus the greenback, extending this week’s advance to 1.6 percent. The kiwi strengthened 0.3 percent, set for a 1.8 percent weekly gain, as ANZ Bank New Zealand Ltd. said its commodity price index climbed 1 percent in May.

The Bloomberg Dollar Spot Index was down 0.2 percent for the week. Investors are paying close attention to U.S. data after Fed officials indicated a potential interest-rate hike as soon as this summer was contingent on continued improvement in the economy. Figures released Thursday by the ADP Research Institute indicated 173,000 workers were taken on last month in America, while filings for unemployment benefits declined for a third consecutive week, according to separate data.

The British pound was poised for a 1.4 percent weekly loss. The currency sank in recent days as successive polls indicated British voters are becoming more inclined to vote in favour of leaving the EU. The yuan was set for a fifth weekly loss, its longest losing streak since December.

Commodities

Brent crude was little changed at $50.03 a barrel. The third drop in U.S. crude inventories in four weeks tempered the impact of OPEC’s decision to stick to a policy of unfettered production, turning down a proposal to adopt a new ceiling on output.

 

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Bank Sentral Tanggulangi Kemelut, Tapi Shock Dampak Brexit Bertahan

Sterling nampak berusaha menanggulangi kemerosotannya terhadap Dolar AS dini hari ini (25/6), setelah terjun 10% ke level terendahnya dalam 31 tahun terakhir pasca pengumuman hasil referendum Brexit. Namun demikian, mata uang ini masih berada di level rendah akibat meluasnya ketidakpastian pasar. Valas lain pun belum keluar dari pergolakan.


Ketidakpastian Dampak Brexit Tekan Sterling Dan Euro
Poundsterling terakhir terpantau bergerak di kisaran 1.3665 terhadap Dolar AS, bangkit dari rekor level rendah 1.3228. Para trader yang diwawancarai Reuters mengatakan bahwa pernyataan pimpinan BoE Mark Carney tentang kesiapan bank sentral untuk menyediakan dukungan ekstra telah membantu memulihkan Sterling.

EUR/USD juga merangkak naik dari 1.0914, level terendahnya dalam nyaris empat bulan, ke kisaran 1.1100an. Meskipun demikian, para analis memperkirakan gejolak politik dan ekonomi pasca Brexit akan berlangsung selama berbulan-bulan. Pasalnya, pasar masih gamang menghadapi ketidakpastian tentang bagaimana bank-bank sentral akan bereaksi merespon pilihan Inggris, bagaimana dampaknya bagi pertumbuhan ekonomi kawasan, dan apakah ini akan menjadi preseden bagi negara-negara lainnnya untuk ikut keluar dari Uni Eropa.

Richard Scalone dari TJM Brokerage Chicago mengatakan pada Reuters, "Ketidakpastian masih berada pada tingkat sangat tinggi". Ia mensinyalir Sterling bisa terpuruk hingga $1.28 pada akhir tahun, sedangkan Euro bisa tergelincir ke bawah paritas terhadap Dolar. Bank multinasional BNP Paribas pun memprediksi konsekuensi Brexit akan meluas. Meski inflasi diperkirakan naik, BoE diproyeksikan bakal potong suku bunga dari 0.5% ke 0%, mengaktifkan injeksi likuiditas, dan menambah QE sebanyak 100 milyar GBP.



Safe Haven Merespon Beragam
Sementara itu, ketidakpastian justru mendorong Dolar dan Yen untuk naik karena tingginya permintaan akan safe haven. Yen, dalam hal ini, masih menjadi pilihan utama pelaku pasar. USD/JPY terpantau masih dalam posisi melorot 3.5% ke 102.38, setelah menyentuh level terendah dalam dua setengah tahun di 99.11.

Spekulasi akan adanya intervensi Bank of Japan membendung penguatan Yen, tetapi sejauh ini para pejabat negeri Sakura baru sekedar bicara. Menkeu Taro Aso dikabarkan mengatakan bahwa PM Shinzo Abe telah menginstruksikan agar ia bekerjasama dengan Bank of Japan serta berkoordinasi dengan rekan-rekan G7 dalam merespon pergerakan pasar. Di saat bersamaan, ia menyatakan ketidaksukaannya pada volatilitas berlebihan di pasar valas dan bahwa ia akan merespon pergerakan pasar saat dibutuhkan.

Di sisi lain, Dolar melonjak ke 0.9726 terhadap Franc Swiss setelah Swiss National Bank (SNB) menjadi bank mayor pertama yang melakukan intervensi dan mendevaluasi mata uangnya sendiri. Indeks Dolar (DXY), yang mengukur kekuatan greenback terhadap enam mata uang mayor lainnya, terpantau naik sekitar 2 persen ke 95.473, hanya sedikit selip dari puncak tertinggi dalam tiga bulan di 96.703.

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