Daily Market Update 12th July 2016
OVERNIGHT NEWS
- UK:
- Theresa May will become the next UK Prime Minister, replacing David Cameron, following the withdrawal from the race of Andrea Leadsom. Theresa May was in the Camp of staying in the Eurozone. She will take the office on Wednesday.
- She said she will not invoke the Article 50 EU exit clause this year
- FED SPEECH:
- Kansas City Federal Reserve President Esther George said U.S. interest rates are too low and she wants the FOMC to get back to raising short-term interest rates gradually to reflect progress on hiring and inflation. George views the current level of short-term rates as “too low given the progress we’ve seen in the economy” and that "keeping rates too low can create risks." “Gradual adjustments” in short-term interest rates mean the central bank is more likely to achieve its growth and inflation goals
FOREIGN EXCHANGE (INDICATIVE RATES)
| Currency | Last | % Change | Overnight Range |
|---|---|---|---|
| DXY | 96.57 | 0.07% | 96.39 – 96.793 |
| EURUSD | 1.1057 | 0.17% | 1.1016 – 1.1075 |
| USDJPY | 102.63 | 1.22% | 101.47 - 102.89 |
| AUDUSD | 0.7536 | -0.32% | 0.7522 – 0.7567 |
| GBPUSD | 1.298 | 0.31% | 1.2851 - 1.3018 |
(Source: FabTrader)
Commodities (INDICATIVE RATES)
| Currency | Price USD | % Change | Overnight Range |
|---|---|---|---|
| Gold | 1353.95 | 1.08% | 1350.9 - 1371.4 |
| Silver | 20.28 | 0.97% | 20.1105 - 20.685 |
| Oil (BRENT) | 46.25 | 0.39% | 45.9 – 49.22 |
| Oil (WTI) | 44.68 | 1.15% | 44.53 – 45.77 |
(Source: Bloomberg and Saxo)
COMMODITIES
Precious Metals: Gold has advanced with silver during past month as investors sought heaven from slowing global growth and fall out from Brexit concern. However with support from prospect of monetary stimulus along with US jobs report, Gold and silver were weaker as a risk-on tone saw investors move back into equities.
Oil: Oil prices continued their period of weakness as investors remained concerned that increasing exploration activity in the US would see US production and inventories remain high. Signs of an end to several supply disruptions in major oil producing countries and a stronger USD also played their part in keeping sentiment bearish.
FOREX NEWS
- USDJPY Rallied more than 1% after Prime Minister Abe said he is planning to add fiscal stimulus following the ruling party’s victory in Sunday’s upper-house elections. He will order measures to support domestic demand, including plans to speed up the construction of high-speed trains. USDJPY was also helped by the positive speech from Fed’s Osborne on rates and the new prime minister announced in the UK. The short term resistance is at 103.50/103.70 for the pair
- GBPUSD is finding some good support at the 1.3000 level and the market took positively the nomination of Theresa May as the next prime minister.
- NZD came off 1% since the post-NFP rally driven partially by buying interest in AUDNZD after the failure to confirm the break at 1.0400
- CAD is the commodity currency suffering the most and USDCAD broke 1.3100 and the 100d MA on the back of lower oil. The next target for the pair is now the 200d MA at 1.3313
Oil prices rise on Iraq loading worries; bearish investors cap gains
Oil futures rose on Tuesday as an interruption in Iraqi crude loadings at Basra threatened to tighten supplies, but prices held close to two-month lows hit in the previous session as investors continued to slash their bullish bets.
Brent crude oil futures were trading at $46.39 per barrel at 0320 GMT, up 14 cents from their last close but still near the Friday's low of $45.90. U.S. West Texas Intermediate (WTI) crude was up 11 cents at $44.87 a barrel.
Traders said the rise in prices was largely a result of a suspension of tanker loading of Basra Light crude at two export terminals in Iraq's south after a pipeline leak.
Although loadings reportedly resumed overnight, Iraq plans to cut crude oil exports from its southern ports to 2.79 million barrels per day (bpd) in August from 2.99 million bpd planned for July, a preliminary loading program showed.
Oil price gains have, however, been limited with financial players betting on price falls, or shorting the crude market, moving away from long positions that benefit from price rises.
Hedge funds and other money managers cut their bullish bets on crude by 22 million barrels over the seven days ending on July 5. These players have cut their net long positions in crude futures and options by almost a quarter, from 633 million barrels to 485 million, over the last four weeks.
"Oil prices continued their period of weakness as investors remained concerned that increasing exploration activity in the U.S. would see U.S. production and inventories remain high," ANZ bank said on Tuesday. "Signs of an end to several supply disruptions and a stronger U.S.-dollar also played their part in keeping sentiment bearish."
Physical markets were also weak, with Asian oil refiners processing less crude as they grapple with margins that plunged to five-year lows after the region was flooded with supply of refined products and as slowing economic growth hits demand for fuels. (Source: reuters.com)
