The EU plans to intervene in markets directly to curb rising energy costs, threatening to push the Euro area's economy into a deep recession.
Morning brief for May 29
2019-11-11 • Updated
The start of this week was really quiet with the UK, the US observing Memorial Day and China celebrating Dragon Boat Festival.
The British pound slumped to 1.2775 on Friday after YouGov poll suggested the UK election race was getting tighter with Theresa May’s party lead over her Labour counterparts to just 5 points. GBP will likely remain under pressure throughout this week as Sunday’s opinion poll appear to confirm the decline of Conservative support. A poll for the Sunday Telegraph showed Labour party regaining its support lacking just 6 points to catch up with the Conservative party. While the conservative win is still the most probable outcome in June 8 election, recent polls raised concerns over the possibility of a smaller working majority for Tories or even a hung parliament.
The US dollar regained its strength on Friday after the Commerce Department upgraded its first quarter GDP estimate and after Fed of San Francisco President John Williams said that the US economy is strong enough for three-four rate hikes this year. The possibility of President Trump being impeached is low. US domestic intelligence and security service is now investigating into the ties of Trump’s son law Jared Kushner with Russian authorities.
Trump’s finally back home after his 9-day foreign trip. Trump’s first foray on the international stage saw him engaged in multiple negotiations in which he touched on many global issues. He visited Saudi Arabia, Israel, met with the Pope Francis, discussed security issues with NATO members and participated in G7 summit in Taormina, Sicily. The later one ended up with the most developed countries failing to agree on a common stance on climate change or trade (because of Trump of course).
USD/JPY is trading a little bit higher in today’s session at around 111.30 from Friday’s low at 111.20. The yen didn’t show any reaction to North Korea’s missile launch. It seems that market already used to this sort of occasions. The pair has room for extension towards the solid resistance towards 111.80 – the horizontal Senkou B span (the upper border of Ichimoku Kumo).
EUR/USD declined to 1.1170 in the Asian session from Friday’s high at 1.1235. The single currency soared to 1.268 last week following the fortunate election outcome but failed to make any further gains. European Central Bank President Mario Draghi is speaking today at 4:00 PM MT time. He will likely be asked about his plans for stimulus withdrawal (QE taper). If Draghi still points to still low inflation figures, the euro will be hurt. The euro area data that came in recent weeks is very strong, The disconnect between accelerating growth in the Eurozone and sluggish inflation is a puzzle that should be unraveled by the ECB officials before they meet to decide on their monetary policy stance on June 8.
The NZD was the major performer on Friday. It spiked almost to 0.7080. In today’s Tokyo session, it was trading at 0.7060 level.
USD/CAD ticked up to 1. 3460 from Friday’s low of 1.3430 as oil crude futures slipped some points in the Asian session. Oil prices suffered significant losses last week after an OPEC-led decision to curb oil supply didn’t go as far as many investors projected.
US oil exports reached a record last week at five million barrels a day, according to Energy Information Administration data…
The past two years have seen the biggest swings in oil prices in 14 years, which have baffled markets, investors, and traders due to geopolitical tensions and the shift towards clean energy.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates?
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.
Last year was tough for the Japanese yen. USDJPY gained more than 30% over 2022, striking above 150 in October. While anticipation of slower Fed rate hikes pulled the pair below the 130 level at the start of 2023, the speculations over the destiny of BOJ’s yield control policy grabbed the attention of the Japanese assets in the middle of January. What lies ahead for traders of the Japanese yen?