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 30
2019-11-11 • Updated
Growing concerns over Greek bailout, early elections in Italy and comments by the ECB President Mario Draghi about the need to maintain the bank’s extraordinary amount of monetary policy support. The ECB has long argued that even with accelerating economic growth, inflation is far from sustainable. To return and stabilize inflation rate close to the bank’s coveted target of 2% an extraordinary amount of monetary policy support is needed. German press report released overnight stated that Greece may opt out of its next bailout payment if country’s officials fail to strike a debt relief deal. Last week, eurozone financial ministers failed to agree with the IMF on Greek debt relief or to give Athens some new loans. They agreed to discuss the following issue at their upcoming meeting in June. The comments from the former prime minister of Italy Matteo Renzi in favor of holding the legislative elections at the same time with Germany have also pressured the euro.
The single currency slid to 1.1130 due to all these headwind factors. It may drop lower towards 1.1250 and 1.1100 levels. The EUR will be under pressure unless it manages to break 1.1190. The market will be focused today on German inflation data for May, US CB consumer confidence report and US inflation for April to define a further direction of the EUR/USD currency pair.
Sterling dropped after a specific opinion poll showed May’s Conservative Party leading the Corbyn’s Labour Party by just five points. Investors were spooked by the fact May’s promise of strong and stable government might be in jeopardy after the Manchester terror attack. The bearish phase in GBP/USD technical outlook is still intact despite the yesterday’s modest rebound from Friday’s low at 1.2775 to 1.2850. In Tokyo session, the pound lost its steam and slipped below 1.2820. If today’s economic releases out of the US are weak, the pound might regain some strength.
USD/JPY moved lower to 110.92 in the Asian session. The economic data out of Japan was a mixed bag with neutral jobless rate report, poor household consumption estimate, and upbeat retail sales figures. The quotes may drop lower towards 110.50 ahead of the solid support at 110.20. In case of a rebound, the pair may rise above 112 – 112.50 levels.
Aussie dropped to 0.7415 ahead of its major release on the day – building permits that beat market expectations. Afterwards, there was a modest upsurge towards 0.7430. The immediate outlook for AUD/USD is still neutral despite the existing bias for a probe of lower levels at 0.7400, 0.7380.
Loonie suffered some losses this week mainly due to falling oil prices. USD/CAD rose above 1.3475 in Tokyo morning. The pair has room for a further extension towards 1.3500. We will get current account data, raw material price index and industrial product price index out of Canada later today.
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.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
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.