Market Review, May 31, 2016

Yesterday we saw the dollar hold steady against other major currencies, as hawkish comments by Federal Reserve chair Yellen still linger.

Trade volumes remained light with financial markets in the U.K. shut for a public holiday and U.S. markets closed for Memorial Day.

EUR/USD edged up to 1.1138, and USD/JPY climbed to 111.15.

This morning yen started to gain some strength as data on household spending, industrial output and unemployment all came better than expected.

Gold rebounded after dropping to key $1200 level for the first time since February.

With traders pricing in a 28% chance for a rate hike in June and 60% in July.

Oil prices are still around the $50 a barrel, although uncertainty ahead of an OPEC producer-group meeting later in the week is expected to cap gains. Iraq has raised its export quota ahead of the meeting, supplying 5M barrels of extra crude to its partners in June.

US oil prices were lifted this morning by the start of the peak demand summer driving season, although international fuel markets were weighed down by rising output in the Middle East.

 

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Market Review, May 30, 2016

FOREX:

On Friday Federal Reserve Chair Janet Yellen said that it could be appropriate to raise short term interest rates in the near future if incoming data in the coming weeks fulfills the expectations of the U.S. central bank.

The dollar rapidly appreciated following Yellen’s hawkish statement. If the economy and the labor market continue to show improvement the fed finds it appropriate to approve an imminent rate hike.

The FOMC has left its benchmark Federal Funds Rate at a targeted range between 0.25 and 0.50% in each of their three meetings in 2016.

At the same, Yellen noted that the unemployment rate remain soft and blamed ineffective fiscal policy initiatives for leading to slower productivity growth, saying; “That’s a serious and negative development.”

Higher rates are bullish for the solar as it’ll become more attractive to yield-seeking investors.

The strong appreciation of the dollar caused the EUR/USD to fall sharply, settling at 1.1115 – 0.71% down on the session.

Since hitting a nine-months high in early-May, the pair has fallen by nearly 3%.

The yen was also lower against the dollar, settling at 110.35.

Bitcoin prices broke through a key $500-level for the first time in almost two years yesterday.

 

COMMODITIES:

The commodity that suffers the most when the dollar finds strength is of course gold. On Friday gold prices dropped settling at 1210.24.
Any rate hike by the Fed this year is viewed as bearish for the gold, as investors will shift to higher yield assets.

Traders are now pricing in a 28% chance for a rate hike in June and 60% in July – according to CME Group’s FedWatch tool.

In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report to see if the world’s largest economy is strong enough for another rate hike.

Oil prices also closed lower on Friday, but still posted a third consecutive weeks of gains amid mounting concerns over global supply disruption.

Both Brent and WTI touched the $50 this past week for the first time since October as traders anticipated a drop in supply after multiple disruptions in Nigeria, France, Canada and Venezuela.

In the week ahead, oil traders will focus on Wednesday and Thursday U.S. stockpile data for fresh supply/demand signals. The reports come out one day later than usual due to the Memorial Day holiday today.

On Thursday we will be looking to the OPEC meeting in Vienna.
As prices are rising, we expect for the oil cartel to keep their production quota unchanged.

 

STOCK MARKET:

U.S. stocked rallied after Yellen said she foresees near-term rate hike.

Any rate hike from the Fed this year are viewed as bearish for equities, as investors will shift to safer investments such as government bonds in order to capitalize on higher yields.

 

*** Holidays in the U.K. and the U.S. today mean low volumes ***

 

Article to read: http://www.cnbc.com/2016/05/27/yellen-rate-hike-probably-appropriate-in-the-coming-months.html

 

 

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Market Review, May 27, 2016

The dollar fell short yesterday after U.S. data showed weakness in business spending plans, denting expectations for a Fed interest rate increase in June.

The market scaled back some of its confidence in a June or July rate hike, ahead of Yellen’s speech today.

Gold was flat during early sessions following stronger U.S. data, but during the Asian session, gold prices rose as consumer prices in Japan came in better than expected, pushing prices higher again.

Crude prices were higher yesterday, nearing the $50 a barrel, before falling back to close slightly lower for the session.

U.S. stocks were very mixed as investors are cautious ahead of a speech from Federal Reserve chair Janet Yellen and oil pared gains after hitting $50/barrel for the first time this year.

 

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Market Review, May 26, 2016

Dollar held strong against other major currencies yesterday, as investors are expecting a rate hike for June which boosted demand for the greenback.

The dollar was lower against the GBP and the CHF.

The pound found support as uncertainty over the looming referendum on a Brexit has eased.

USD/CAD dropped to 1.3082 following the decision of the Bank of Canada to leave its overnight cash rate unchanged at 0.50%, in line with market expectations.

As investors are betting on a summer rate hike, gold keeps suffering and yesterday the commodity fell to 7-week low.

Oil prices inched towards $50/barrel after U.S. government figures showed a sharper-than-expected drawdown of crude stocks last week as imports dropped.

U.S stocks rallied yesterday as crude futures hit a fresh 6-month highs while testing a key technical level at $50/barrel. This pushed stocks in energy and basic materials industries up, each gaining more than 1%.

 

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Market Review, May 25, 2016

Yesterday we saw the dollar further extend its gains, hitting a fresh 2-month peak after data showed that U.S. new home sales rose far more than expected in April. This added to expectations for a June rate hike by the Federal Reserve.

Separately, San Francisco Fed President John Williams said he still sees the central bank raising interest rates two to three times this year.

EUR/USD was down at 1.1153, the weakest level since March.

GBP was strong yesterday, after a new opinion poll showed the ‘Remain’ campaign with a big lead with one month to go until the referendum on Britain’s European Union membership.

Bank of England Governor Mark Carney defended the central bank’s decision to flag Brexit risks on Tuesday, after saying earlier this month there was a risk of recession. He added that the outcome of the June 23 referendum could require the BoE to make a big reassessment to how it sets interest rates.

Gold fell sharply dropping to a fresh low this month, as new home data in the U.S. lifted the dollar and a closely-watched survey on declining sentiment toward a potential Brexit weighed on the precious metal.

Crude prices jumped sharply as API data shows sharp crude drop – as Iraqi output slows from record levels.

U.S. stocks rose sharply, erasing all of their losses from the previous two sessions, as new home sales data lifted home-builder and supplier stocks.

 

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Market Review, May 24, 2016

The dollar is held onto modest gains against other major currencies yesterday, as investors are expecting a rate hike in June following the Fed’s hawkish comments last week.

The yen was boosted after data showed that Japan’s trade surplus for April came far above forecast.

USD/JPY declined to 109.41.

Another report showed that Japanese factory activity contracted at the fastest pace in over three years in May as new orders fell.

This added to pressure on the Bank of Japan to step up measures to spur growth.

EUR/USD fell to 1.1194, following weak data from the euro zone.

As rate hike bets are growing, gold prices are suffering and yesterday they dropped to 4-week low.

Oil prices also dropped as focus shifts back to production outlook.

Today we have the API report and tomorrow the inventory report that will give us further indication on where we are at with the global supply glut.

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Market Review, May 23, 2016

On Friday we saw the dollar take a breather from its gains, and the EUR/USD rose moderately, bouncing from one-month lows. This was after the dollar had shown strong gains in the beginning of the session after data showed that U.S. existing home sales rose more than expected and as expectations for a U.S. rate hike in June continued to support the greenback.

Market players also continue to digest signals from the FOMC that it will raise short-term interest rates at a two-day meeting next month if the domestic economy shows improvement over the next few weeks.

With the slight gains, the euro halted its losing streak against the dollar which has found a part of its strength back after the hawkish signals from the Federal Reserves that it appears ready to lift interest rates.

Any rate hike this year by the Fed is seen as bullish for the USD.

USD/JPY jumped to 110.54.

USD/CAD trimmed its gains after the release of positive Canadian inflation data, but the dollar remained close to six-week highs.

As dollar rallied, gold ticked down as investors remained focused on the dollar’s renewed upward push and hawkish indications from the Fed.

Dollar dominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Any rate hikes this year are viewed as bearish for the gold, which struggles to compete with high-yield bearing assets in rising rate environments.

Crude prices hit a fresh 7-month high on Friday’s early trading session, followed by a retreat in gains amid broad signals that supply disruption in Nigeria, Canada and Libya are about to end and comments from Russia’s energy ministry casting doubt on the resolution of a coordinated output freeze between OPEC and non-OPEC producers.

U.S. stocks rebounded a bit on Friday, after investors had 2 sessions to digest the hawkish signals from the Fed.

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Market Review, May 20, 2016

Yesterday the dollar edged higher against other major currencies despite the release of disappointing U.S. data, as investors are still letting hawkish news from the Fed sink in.

EUR/USD slipped 0.17% to 1.1195, the lowest since March 29. Later on in the session the pair was able to recover some of its losses and settled at 1.1216.

Gold crashed to 3-weeks lows, as investors price in June rate hike and settled at 1,253.25.

Crude prices fell slightly as the dollar surged settling at $48.17.

As the USD surged, U.S. stocks fell sharply, as Fed hike looms.

 

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Market Review, May 19, 2016

Yesterday, ahead of the Fed minutes, we saw the dollar remain broadly higher against other major currencies, as investors awaited anxiously for indications on the timing of future interest rate hikes.

The expectation for a rate hike mounted after data on Tuesday showed that U.S. consumer prices rose at the fastest rate in more than three years in April.

Later on in the session, EUR/USD fell sharply as the Fed sent strong indications that it will raise short-term interest rates when it meets next in June if the domestic economic outlook improves as expected.

EUR/USD closed the session at 1.1218, down 0.85%

Any rate hike this year are viewed as bullish for the dollar, as investors pile up in order to capitalize on higher yields.

The precious metals, gold & silver, suffered from Fed’s hawkish news and inched down.

U.S. crude oil stockpile rose last week by 1.3million barrels, compared to a 2.8minion barrels decrease expected.

U.S. stocks were mixed during the earlier session, then fell sharply after the hawkish news from the Fed.

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Market Review, May 18, 2016

Yesterday, in the early session of the U.S. session, we saw the dollar erase gains other major currencies, despite the release of positive U.S. economic reports, though it still continued to trade close to a 3-week high.

After the U.S. inflation data failed to convince traders that the Fed was moving closer to another interest rate hike, the dollar dipped even more.

That resulted in the dollar erasing gains and trading lower against the euro, yen and the franc.

Concerns over global economic growth partly drove a dip in U.S. stocks, which helped the safe-haven currency, yen, to recover against the dollar.

After the data, FOMC members gave hawkish speeches signaling an increased likelihood of multiple rate hikes this year despite the release of subdued core inflation figures. Yet the EUR/USD was virtually flat.

The euro found support after reports that the euro zone finance minister will seek to strike a deal with Greece on a package of contingency steps to ensure that Athens will meet fiscal targets.

Commodities gold and silver went up yesterday, as inflation shows few signs of firming.

Crude prices remained near 6-month highs ahead of API inventory report.

Although data showed that crude oil stock fell less than the decline forecast, prices edged higher in the Asian session. That was because they still show solid draws in refined products.

Today we will be looking at the Inventory report to shed further light on the stock pile situation.

U.S. stocks tumbled yesterday, as Fed members strongly hinted that the U.S. central bank could raise interest rates multiple times this year. This provided downward pressure on the major indices.

 

 

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