FxNet Daily Market News

Trading Discussion News and Economy
1

[B]Gold Prices Ease as Rate Hike Expectations Increase[/B]

Market focuses on St. Louis Fed President Speech

Gold futures extended losses from the earlier session in European trade this Thursday, reaching a four-week low as market participants adapted to the Federal Reserve’s statements about the time the next US rate hike takes place.

St. Louis Fed President James Bullard supported the possibility of an upcoming raise in interest rates in 2016. In addition, in an interview on Wednesday he stated that policymakers should take into consideration raising rates in their April meeting.

Gold for April delivery eased $7.30 to trade at $1,216.70 a troy ounce by 08:20GMT, or 4:20AM ET, after to reaching a session low of $1,211.20, the lowest level it has hit since February 23.

The market will focus on more comments by Bullard later Thursday to determine the balance of opinions between policymakers on the possibility of more interest rate hikes. Bullard’s speech regarding the US economy and monetary policy is scheduled at the Association for Business Economics, in New York at 12:15GMT, or 8:15AM ET.

On Wednesday, gold had moved up $24.60, while hawkish comments by the Federal Reserve pushed the US dollar up.

The US dollar index, which measures the greenback’s strength against a basket of six other major currencies, was up 0.3% reaching a one-week high of 96.35.

2

[B]Dollar Rises Against Yen, Fed Comments will be in Focus[/B]

Investors anticipate releases to predict rate hike possibility

The dollar was stronger against the yen this Monday, following its rebound the past week after receiving comments from Fed officials who supported the idea of raising interest rates.

The greenback recovered from falling earlier in March when the Fed decided to deliver two instead of four rate hikes in 2016.

US economic indicators, which will be released this week including non-farm payrolls and manufacturing PMI, will give market participants a chance to determine whether the economy is strong enough to handle more rate hikes this year.

Other US data that could affect the dollar this week include the core personal consumption expenditures price (PCE) index, to be released on Monday and Thursday’s Chicago purchasing management index (PMI).

Chief Japan FX strategist at Bank of America Merrill Lynch in Tokyo said “Statements by the Fed’s Yellen and Dudley will also be in focus. They are core Fed board members and dollar will be supported if they express hawkish views”.

Fed Chair Janet Yellen’s speech will take place on Tuesday and New York Fed President William Dudley’s on Thursday.

USD/JPY added 0.42 percent to 113.59; it had gained 1.4 against the yen the previous week, recovering from a 17-month low of 110.67. A few investors said that the dollar’s gains versus the yen could be limited in the near term.

According to Shinji Kureda, head of FX trading group for Sumitomo Mitsui Banking Corporation in Tokyo, Janet Yellen’s speech won’t sound as hawkish as the recent statements from other Fed officials and be more in line with what came out of the Fed’s recent policy meeting.

Furthermore, Kureda said that investors appear to have become more cautious about taking on foreign exchange risk after the launch of negative interest rates.

EUR/USD was almost unchanged at 1.1170 after a loss of 0.9% the past week.

AUD/USD added 0.4 percent to 0.7537 and NZD/USD added 0.10 percent to 0.6702.

The US dollar index, which measures the dollar’s value against a basket of six other major currencies reached a high of 96.399 earlier this Monday, the highest it reached since March 16.

3

[B]Australian Dollar Remains Steady, New Zealand Dollar Stronger[/B]

Janet Yellen’s speech remains in focus

The Aussie remained steady against the dollar this Tuesday, as the kiwi grew stronger while market players processed last session’s US economic reports and focused on Fed’s Chair Janet Yellen’s speech due later Tuesday.

AUD/USD was slightly changed at 0.7545, NZD/USD surged 0.28% to trade at 0.6743.

The US Commerce Department report on Monday showed that personal spending moved up 0.1% in February, in accordance with economists’ expectations.

There has been a 0.2% rise in personal income, above forecasts for a 0.1% gain.

The Federal Reserve’s preferred inflation measure, declined 0.1% the previous month because of lower energy costs.

The PCE index moved up 1% on an annual basis, lower than its 1.2% increase in January.

In spite of the tightening labor market, the Fed may increase rates only gradually in 2016, data suggested.

During early trading USD/JPY added 0.17% to 113.64. Japanese household spending for February added 1.2 percent, while annually it fell 1.5 percent. Unemployment was up 3.3% and retail sales added 0.5% for February and 1.7% year on year.

During early Asian trading the euro was steady at 1.1194 dollars, after adding about 0.3 percent against the greenback following six days of losses.

Investors are waiting for Janet Yellen’s speech on Tuesday, for new indications regarding interest rates.

The US dollar index, which measures the greenback’s strength versus a basket of six other major currencies, was up 0.10% at 96.09, not far from Monday’s one-week high of 96.42.

4

[B]Gold Prices Hold Above One Month Low Ahead of Yellen’s Speech[/B]

Prices still on an upward trend for the year so far

With investors looking ahead to Federal Reserve Chair Janet Yellen’s speech gold prices were seen slightly lower on Tuesday but still holding above one month lows.

US gold futures for June delivery lost 0.11 percent to 1,220.7 dollars an ounce on the Comex of the New York Mercantile Exchange. Gold feel to a one month low of 1,207.83 dollars on Monday then recovered to 1,221.46 dollars.

Prices were under pressure from expectations that the Fed might raise interest rates in the near future, which would help the dollar go up and make gold prices less attractive to foreign investors.

The possibility of a rate hike was supported by data released from the US Commerce Department showing that Personal spending added 0.1 percent in February as expected, while inflation as measured by the PCE index (the Fed’s preferred inflation measure) was 0.1 percent lower in February, and on 1 percent up annually.

Gold prices have been supported by investors’ choice of safe havens amid unstable global economic conditions. The precious metal has gained 15 percent since the start of the year.

Elsewhere on the Comex silver futures for May delivery lost 0.46 percent to 15.12 dollars an ounce, while Copper for May lost 1.2 percent to 2.219 dollars a pound.

5

[B]Oil Prices Hit Two Week Lows[/B]

EIA report weighs on prices

On Thursday oil prices fell to more than two week lows, as EIA stockpile numbers highlighted the persisting supply glut which has been weighing down on oil prices.

Brent Crude futures lost 45 cents falling to 38.81 dollars a barrel from 5:18 GMT, 12 cents higher than its previous session during which it hit a high of 40.61.

Prices were pressured by a higher dollar as the dollar index was seen at 94.931.

The US Energy Information Administration (EIA) released its reports on Wednesday showing that US Crude stockpiles were 2.3 million barrels higher reaching 534.8 million barrels in the week ending March 25th.

Despite the negative outcome of the report, it was still lower than analyst expectations of a 3.3 million barrel increase.

Refinery crude runs added 414,000 barrels per day and refinery utilization rates added 2 percentage points to 90.4 percent.

Crude prices which have added about 50 percent since mid-February have started losing momentum this past week. “Oil prices will trend down again …. $35 a barrel will be the support level. Low prices are not sustainable in the long run” Tony Nunan, an oil risk manager at Japan’s Mitsubishi Corp said, “anytime prices get close to $45-$50 a barrel, funds that have taken long positions are likely to take profits. Unless things really ignite the global economy, then people will sell off at that level”.

The market is looking ahead to the April 17th meeting between OPEC (Organization of Petroleum Exporting Countries) and non OPEC countries in Qatari capital Doha, to discuss a possible production freeze to help maintain prices

6

[B]Aussie Recovers as Trade Balance Widens[/B]

Dollar holds amidst rate hike speculations

The Australian dollar recovered on Tuesday, while the central bank remained steady in expectation for new labor data for a better economy assessment.

AUD/USD traded at 0.7614, up 0.11%. The Australian trade balance for February expanded to a deficit of.41 billion Australian dollars, compared to a previously estimated deficit of 2.6 billion Australian dollars. Imports were flat as exports fell 1%.

USD/JPY switched hands at 110.89, falling 0.40%, as the Governor of the Bank of Japan’s statements regarding bond buying affected the market.

Japan reported that average cash earnings rose 0.9% in February annually, higher than the previously estimated 0.2% gain, as overtime pay moved up 0.40% which is an improvement from a 1.3% annual decrease.

Data showing a February decline on US factory orders and statements from a Fed official causing speculation on additional policy tightening in 2016 held the dollar steady against other major currencies Monday overnight.

Chicago Federal Reserve President Charles Evans stressed his view that the US economy can take two more rate hikes in 2016, “A very shallow funds rate path, such as the one envisioned by the median FOMC (Federal Open Market Committee) participant, is appropriate” he said in remarks prepared for a speech in Hong Kong.

On the other hand Boston Fed president Eric S. Rosengren said that he felt the market was mistaken in its expectations for only zero to one rate increases in 2016.

Elsewhere the US Census Bureau stated that factory orders declined by 1.7% the previous month, meeting expectations. Factory orders increased 1.2% in January, compared to an initial estimate of a 1.6% rise.

The US dollar index, which measures the greenback’s strength versus a basket of six other major currencies, was down 0.04% to 94.55.

7

[B]Aussie Rises vs Dollar, Kiwi Remains Steady[/B]

Investors focus on Fed minutes

The aussie was stronger against the dollar on Wednesday, as the kiwi remained steady while market participants focused on the minutes of the Federal Reserve’s March meeting, for news on the future path of interest rates, which will be released later today.

AUD/USD moved up 0.24% trading at 0.7562.

The greenback found support following the Institute of Supply Management’s report on Tuesday showing that its non-manufacturing manager’s index increasing to 54.5 from 53.4 the previous month.

Gains on the other hand were limited when data showed that the US trade deficit expanded to $47.06 billion in February from $45.88 billion in January.

NZD/USD slightly changed at 0.6811.

Commodity currencies found support as oil prices recovered late Tuesday after hitting one-month lows.

The US dollar index, which measures the greenback’s strength against a basket of six other major currencies, was up 0.15% at 94.76.

8

[B]Dollar Stronger versus Yen and Euro[/B]

Yellen backs Interest Rate Hike

The dollar was stronger on Friday following positive job reports and a weaker yen.

Europe’s shared currency lost 0.1 percent against the dollar falling to 1.1366 dollars after reaching its highest level since October of 2016 at 1.1454 on Thursday.

The US dollar was supported by the Labour Department’s report showing that initial claims for state unemployment benefits were lower by 9,000 last week, to a seasonally adjusted 267,000 for the week ending April 2nd. Expectations had been on benefits dropping to 270,000.

Unemployment has been blow 300,000 – the threshold which separates between a healthy and unhealthy economy – for 57 weeks, the longest continuous time since 1973.

“The persistently low level of claims should provide some reassurance that the economy is growing, even if that growth still appears more sluggish than most would have hoped a few months ago” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Michigan.

The market is still on watch for the possibility of more rate hikes and their timing, Fed Chair Janet Yellen has said that the economy can’t take many hikes this year due to faltering global economy which can threaten the US economy, the US market however is starting to show signs of improvement which could support more hikes.

“The labour market is on a solid footing. Layoffs are low, hiring is good, and workers who do lose their jobs are finding new ones quickly”, said Gus Faucher, deputy chief economist in Pittsburgh.

On Thursday Yellen took the stage in New York with the two previous Fed Chairs, Ben Bernanke and Paul Volcker who appeared together for the first time at a New York non-profit residence for students.

“The US economy has continued to progress in a satisfactory way. We continue to see good job performance, some evidence of inflation moving up, so that was our expectation when we raised rates in December” she said, “So yes, there is accommodation in the monetary policy that we have. But we think the gradual path of rate increases will be appropriate… we remain on a reasonable path and I don’t think December was a mistake”.

In December the Fed raised its rates for the first time in almost a decade.

The US dollar saw gains against the yen after Japanese Finance Minister Taro Aso said that rapid forex moves are not helping and yen moves are one sided hence Japan would take steps to improve the situation. Following the statement the yen fell against the US dollar by 0.4 percent with the dollar trading at 108.67 yen, after the dollar fell to its weakest level since October of 2014 at 107.57.

“More aggressive jawboning will be the near term option to maintain USD/JPY above 105” said ING strategists.

The yen fell against the euro by 0.3 percent with the euro trading at 123.47 yen, and is expected to lose up to 2.9 percent for the week.

The US dollar index which measures the greenback against a basket of six major currencies added 0.1 percent to 94.579.

9

[B]Yen Retreats from Monday’s Rally [/B]

Aussie and Kiwi higher than greenback

After reaching its two year high against the greenback on Monday the Japanese yen lost some momentum on Tuesday following comments from Japan’s policymakers, while the Aussie and Kiwi gained against their US counterpart.

USD/JPY added 0.20 percent on Tuesday trading at 108.16. On Monday USD/JPY had fallen to 107.65, its weakest since October of 2014. Last week alone the US dollar lost 3.2 percent against the yen in the previous week, and for the year 10 percent.

Japan’s Chief Cabinet Secretary Yoshihide Suga said that the government was monitoring the Forex market and that moves in the yen are one sided and speculative. There aren’t any expectations for the government to intervene in its currency’s movements before the G20 meetings in Washington.

Elsewhere the Australian dollar was boosted by positive news releases; the National Australian Bank showed that its business confidence index went up to 6 in March from 3 in February, and the business survey went up to plus -12 in March from plus -8 in February.

AUD/USD added 0.33 percent to a one week high of 0.7620. NZD/USD added 0.22 percent reaching its highest level in a little over a week at 0.6873.

The greenback remained under pressure of speculations about interest rate hikes that could take place this year.

​The US dollar index which measures the greenback against a basket of six other major currencies was steady at 94.01.

10

[B]Oil Prices Dip Ahead of API Report[/B]

Possible production freeze continues to support market

Oil prices were lower on Tuesday as markets looked ahead to US stockpile numbers that will be released by the American Petroleum Institute (API).

Crude oil for May delivery lost 0.27 percent on the New York Mercantile Exchange trading at 40.42 dollars a barrel, while Brent crude lost 0.30 percent falling to 42.70 dollars a barrel.

The API will be releasing its stockpile estimates for crude, gasoline and distillates up to the end of last week, while on Wednesday more accurate numbers will be released by the US Energy Information Administration (EIA).

Oil was supported earlier by comments from Russian Energy Minister Alexander Novak who said that Russian oil production will remain flat in 2017 when markets had expected production would be increased in 2016.

The minister had remained positive about the April 17th meeting in Doha between major oil producers, “Of course, we hope [for a deal]” Novak told reporters, “otherwise we would have not discussed this issue… a freeze at January levels is being discussed, but other proposals could be made” he said.

Iran continues to reject freezing its output at January levels as suggested, which would be 2.93 million barrels per day, when the country aims to reach pre-sanction levels.

A possible production freeze has helped oil prices recover from 12 year lows hit in February as the oversupplied market found some hope for production to be lowered in order to regain higher prices.

Last week industry group Baker Hughes reported that US oil rigs were lower by 8 and at 354 last week, while in the week ended April 1st US stockpiles fell by 4.9 million barrels.

11

[B]Aussie Gains on Positive Job Reports[/B]

Currency commodities remain affected by oil prices

The Aussie was stronger versus the dollar on Thursday, following the release of positive Australian employment data as the kiwi fell more than 1% due to sentiment improvement on the greenback.

NZD/USD fell 1.05%, trading at 0.6847, while AUD/USD moved up 0.10% to 0.7661.

According to the Australian Bureau of Statistics, the amount of employed people in March increased by 26,100 instead of the expected 20,000 increase. In February the number of employed people fell by 700, in contrast to a previous estimate of a 300 gain.

The report showed that Australia’s unemployment rate fell by 5.7% in March from 5.8% in February, instead of meeting expectations of reaching 5.9%.

Sentiment on the greenback was improved following Wednesday’s positive Chinese trade data, which lessened concerns regarding the outlook for worldwide economic growth.

Furthermore, official data showed that Chinese exports rose 11.5% from a year earlier in March which was the first rise since last June.

For the time being, commodity currencies stayed under pressure while oil prices kept declining for a second day.

Earlier Thursday, OPEC warned of slowing demand as Russia stated that there will be minor commitments at the upcoming meeting in Doha, Qatar next Sunday.

The US dollar index, which measures the greenback’s strength against a basket of six other major currencies, was up 0.20% at 95.00, the highest level reached since April 6.

12

[B]Aussie and Kiwi reach 10-month highs against Dollar[/B]

Greenback remains under pressure

The Aussie and Kiwi reached ten-month highs versus the US dollar on Tuesday, while the minutes of the Reserve Bank of Australia’s (RBA) meeting showed that interest rates are remaining steady for a while and employment trends will be kept in focus.

The RBA is concerned about the strength of the Aussie, stating “members noted that an appreciating exchange rate could complicate progress in activity rebalancing towards the non-mining sectors of the economy”.

AUD/USD rose 0.59%, reaching a 10-month high of 0.7756.

Commodity currencies increased due to higher oil prices, as Kuwait’s oil worker strike cut the country’s crude output almost in half.

NZD/USD rose 0.76% also reaching a 10-month high, trading at 0.7001.

The greenback stayed under pressure due to Friday reports showing that US inMarch declined more than expected, as there was a slight decrease in consumer sentiment this month as well.

The reports pointed out that the Fed will probably take a cautious approach on future interest rate hikes.

The US dollar index, which measures the greenback’s strength versus a basket of six other major currencies was 0.17% at 94.29, reaching a new low since April 13.