Morning brief for April 13

Morning brief for April 13

2019-11-11 • Updated

If I asked you who is the main stirrer-up of markets. Without missing a beat, you would probably give me the following answer: “Mr. T-R-U-M-P”. And you would be absolutely right, considering the case of today’s market moves triggered by the latest Trump’s Wall Street Journal interview. My American friends told me that his speech was like a ray of sunlight was them. Their newly elected President has finally started speaking intelligently about various political and economic issues. The main takeaway from the interview is that Donald Trump has reversed almost all of his nonsense promises/statements from his election campaign.

He backed away from labeling China a currency manipulator. He is toying with the idea of Fed Chair Janet Yellen re-nomination once her term is expired. Trump has also become a fan of low-interest rates having said in his very-very Trumpanese that “it is very, very hard to compete when you have a strong dollar and others are devaluing their currency,” so, “I do like a low-interest rate policy, to be honest with you.” After such revelation, the US dollar gapped lower.

The US President also noted that his administration is definitely not getting along with Russians (“we might be at an all-time low” in the relationships”). This makes us believe that the worst is still to come; there will be more gains for safe-havens on the rise of geopolitical tensions. But we must admit that political leaders managed to de-escalate the situation. Trump and China’s President Xi had a phone hookup yesterday. China committed itself to the denuclearization of the Korean peninsula through peaceful means. Some fears are still in place, as North Korea is preparing to conduct an additional launch of the missiles to celebrate the anniversary of Sim Il Sung’s birthday (the army’s founding day) on April 25.  

EUR/USD swung to 1.0675 overnight on the USD weakness. The unexpected rebound has a scope to extend higher to 1.0690, 1.0700. The immediate support can be found at 1.0620 (100 day MA and 50% Fibo level traced from this year low).

USD/JPY dropped to almost 108.70 which is the lowest point from tumultuous November 2016. A break of the sturdy support at 108.60 will open the way to downside towards 108.00.

AUD/USD was an absolute gainer in Tokyo session as Australia’s jobs report for march smashed markets’ expectations. Employment increased by 60.9K in seasonally adjusted terms (the largest lift since September 2015). The jobless rate was unchanged at 5.9%. China trade balance data also was herculean with a substantial growth in both exports and imports. After the sharp rebound, Aussie has a scope for a further appreciation towards 0.7615/0.7625. But the rollback towards the immediate supports at 0.7530, 0.7490 is not ruled out.

Loonie has strengthened to 1.3225 against the greenback after Trump said he would like to have a weak USD. The Bank of Canada maintained its overnight rate target at 0.5% as it was expected. Today’s focus will on Canadian manufacturing sales and home prices which are due at 3:30 pm MT time.

Brent oil futures slid to $55.85 on the rise of concerns about expanding US oil production industry.

GBP/USD rose to 1.2565 in the Asian session. It appears that the British pound is one of the main beneficiaries of a rise in nervousness amongst investors as the Brexit is perceived as a fate accompli (until the EU official deliver their negotiating guidelines). A move above the strong resistance at 1.2630 will allow us to count on the continuation of the rally. But the recent rebound might not last long. The quotes might slide towards nearest support at 1.2475, 1.2410 especially if there are strong headlines in US producer price index release (it will be published at 3:30 pm MT time).  


Why is oil's rally in danger?
Why is oil's rally in danger?

Yes, oil prices are burning right now, and inflation is getting hotter along with it worldwide. However, the oil's bullish momentum is under threat.

Oil near $130 is a nightmare for inflation
Oil near $130 is a nightmare for inflation

Oil markets were under great pressure amid increased demand and falling supply. OPEC+ is unable or unwilling to achieve its self-imposed production targets and insists on limiting production increases by 400,000 barrels per day despite rising prices.

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