I’m Back! Could Oil’s three-year bear run finally be over?

Back at the end of October, US crude oil inventories hurt WTI oil once again as it came in higher than expected at 0.9 million barrels as opposed to the -2.6million barrels.

 

The fact of the matter is the oversupply that has been hurting WTI and Brent Oil since the end of June 2014.

 

Due mainly to U.S. Shale there has been an abundance of oil which has pressured prices lower and they have in fact collapsed by more than 50% from its peaks in early 2014.

 

Reacting to the weaker prices OPEC (Organization of Petroleum Exporting Countries) and other oil producing countries such as Russia agreed to cut production until the end of March 2018.  This move injected abit of life into oil which bounced back from its lows of $26 per barrel and throughout 2017 it has traded between $42 per barrel to this year’s high of $57.59 per barrel.

 

The reason behind the current stable mood now there is fear that a lack of supply which could push prices higher.  In interview with Bloomberg in October, the ever influential Saudi Crown Prince Mohammed bin Salman said that he backed extending OPEC production cuts past the original date of March 2018.

 

His was not the only voice calling for the extension of production cuts, Russia President Vladimir Putin has also backed an extension to the very least until the end of 2018.

 


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With both these dominant political figures supporting this move when OPEC meets this month, it will indeed signal a continuation in limiting the supply of crude oil.

 

Adding to the mix is the latest unrest in the middle east which has injected even more upward momentum to oil prices.  Over the weekend, a number of Saudi princes and leading businessmen were arrested by the Saudi authorities on corruption charges.  This move has been seen by outsiders as the Crown Prince Mohammed bin Salman consolidating his power as he attempts to make massive constitutional changes to the country.  Tension in the region have increased further with a statement made by top Saudi Ministers who have said that Lebanon has declared war on the Kingdom and further sabre rattling with Iran.  These latest developments are destabilizing the region with oil prices clearly benefitting.

 

There is also another factor to be taken into consideration on why oil prices seem to be rising and in fact it maybe now at the end of its three-year bear run.  Although US Shale is expected to continue to increasing healthy production there are opinions that due to the three years of falling oil prices, investment into production has decreased which could cause further drops in supply.  With that and the slow improvement in the world economy, demand for oil could increase which will in turn not only support oil prices but could even boost it to $65 per barrel in the long term.

 

At the end of the day, having suffered for three years, maybe it’s time for oil to have a bit of break.

 

Source: https://www.bloomberg.com/news/articles/2017-10-27/oil-investors-roll-the-dice-on-opec-as-saudi-prince-ups-the-ante

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This Week’s Economic Calendar 6 November 2017

Last week was an extremely active macroeconomically – the BoE increased its interest rate for the first time in a decade, the NFP came in significantly under expectations and the EU saw a drop of its GDP from the previous period and came in under expectations 2.3%.

 

Monday – 6/11

Today Governor Kuroda has already delivered his speech, noting that signs of economic growth are plentiful – pointing towards his expectation that Japan’s inflation target of 2% soon.  This saw the JPY slipping slightly – because even though Kuroda’s overarching message was positive, his speech was received as dovish by markets. Otherwise Monday is poised to be a quiet day.

 

Tuesday – 7/11

More on the safe-haven, no interest hike front – tomorrow, Tuesday, at 03.30 GMT the RBA will announce its rate decision – or lack thereof. At the moment analysts and markets are expecting it to hold, that may pull the AUD down slightly, like it did JPY today.

So its seems that this week has a theme – since CAD (another safe-haven) might be affected by BoC Governor’s speech on Tuesday. The BoC has also been dovish recently so much like its Japanese and Australian counterparts – markets will keep an ear to the ground for anything hinting towards a future rate hike.

 

Wednesday – 7/11

The EU non-monetary meeting is slated for 08.00 on Wednesday and although it won’t deal with monetary policy, there might be statements made hinting towards a change in their recent dovish approach.

NZD traders will be looking out for the RBNZ Interest Rate Decision at 20.00 GMT.

 


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Thursday – 8/11

It seems that even markets need to rest – and Thursday is the day, since no significant economic events are scheduled. Which is appropriate considering its National Ample Time day.

 

Friday – 9/11

Another relatively quiet day with the only news being the RBA Monetary Policy Statement report, which reveals whether the risk/reward ratio of a rate hike is appropriate, or if monetary policy should remain loose.

 

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Market Update: NFP falls short of prediction

After the shocking NFP number released back in October which came in at -33K, there was expectation that Novembers Non-Farm Payroll would show a strong come back with a forecast of 310,000 new jobs created.  However, though there was a bounce back the final number wasn’t quite as strong as the NFP came in at 261k new jobs.

The Average hourly earnings also missed its forecast of 2.7%, instead coming in at 2.4%.

However, US unemployment came in at 4.1%, which beat the expectations of 4.2%.

 


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With talk of the Fed raising interest rates once again in December, there was a lot of anticipation that a strong job figure would add more fuel to the fire that the FOMC will indeed act.  Though this slightly disappointing NFP number doesn’t completely rule that out from happening, on the initial announcement it did bring in the USD bears into the market.  However, at the time of writing the market has returned pretty much to the levels it was trading before the final number was released.

At the time of writing, the EUR/USD is trading at 1.1654, USD/JPY 114.02 and Gold is at $1277.15.

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“Solid” and a new chair: Fed base rate decision and the new Fed Chairman?

On a day of announcements involving the Federal Reserve it was a keyword used that fueled speculation of who the new Fed chairman will be catching the attention of the markets.

 

First up was the Fed base rate decision which really didn’t surprise anyone – they took no action as expected and kept rates at 1.25%.  So far in 2017, the Fed has raised the base rate twice and the expectation is that they will raise rates once more in December.

 

The anticipation of interest rate hike in December was further increased thanks to the word “solid” being used to describe the US economic recovery in the statement which followed.

 

With the US economy expanding by 3% in the last quarter which means the US is on its best six-month streak of GDP growth since 2014, with many analysts beginning to think that an interest rate hike next month might be a full gone conclusion.

 

 

The only fly in the ointment is that inflation is still way below the target rate of 2% with it currently at 1.3%.

 

Today US President Donald Trump is expected to introduce to the world his choice for the new Fed Chair.

 

According to rumours, Jerome Powell is suspected to be Trump’s man of choice to replace Yellen when her term expires in February.  However, if that is the case he will be the only one of nominees that will have to be approved by the Senate before taking over one of the most coveted positions in the financial world.

 

Whoever it ends up being,  they will inherit an economy which though has low inflation, accelerating  growth and unemployment which is at a 16 year low, giving the new chair the room to continue next year to gradually raise interest rates.

 

Market is fairly muted currently, with EUR/USD at the time of writing trading 1.1641, USD/JPY at 114.03 and Gold at $1278.42.

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November 2017 Market Outlook for EU

Although the Eurozone economy gained momentum over the past few months, uncertainty looms with the European Central Bank gearing up to begin unwinding its monetary stimulus. Amid this uncertainty, there is growing interest in the market-moving indicators for November.

 

November 2: Germany Unemployment Rate (October)

Germany’s adjusted unemployment rate declined to 5.6% in September, from 5.7% in August, the lowest since in 1990. The rate is expected to remain at 5.6% in October. The nation’s seasonally adjusted jobless total declined by a staggering 23,000 to 2.506 million in September, following a decline of 6,000 in August and coming in significantly better than the market expectations of a 5,000 drop. The estimate for October stands at a decline of 5,000.

 

November 3: US Balance of Trade (September), US Non-Farm Payrolls (October)

America’s trade deficit narrowed to US$42.4 billion in August, from US$43.6 billion in July. Expectations are for a substantial widening of the deficit to US$45 billion in September. Also, US non-farm payrolls fell sharply by 33,000 in September, significantly below market expectations of a 90,000 gain. The market consensus stands at an optimistic 300,000 increase in October.

 

November 9: Germany Balance of Trade (September), UK Balance of Trade (September)

Germany’s trade surplus expanded marginally to €20 billion in August, following an increase to €19.5 billion in July. Meanwhile, the UK’s trade deficit widened to £5.63 billion in August, from £4.24 billion in July, significantly higher than market expectations of a £2.80 billion gap and marking the largest trade deficit since September 2016.

 

November 14: Eurozone GDP Growth (Q3), Germany GDP Growth (Q3), Germany Economic Sentiment (November), Italy GDP Growth (Q3), UK Inflation Rate (October)

The Eurozone economy expanded 2.3% year-on-year in the second quarter of 2017, following an expansion of 2% in the first quarter. Expectations are for growth to accelerate marginally to 2.4% in the third quarter. Germany recorded GDP growth of 2.1% in the second quarter and is likely to report 2.2% growth for the third quarter. Economic Sentiment in the country rose to 17.6 in October, although missing market expectations of a reading of 20. Meanwhile, Italy’s economy expanded 1.5% in the second quarter and is widely expected to accelerate to 1.7% in the third quarter. Also, the UK is expected to report a rise in its inflation rate to 3.2% in October, from the 3% reported for September.

 

November 15: US Inflation Rate (October)

Inflation rate in the US rose to 2.2% in September, from 1.9% in August. The rate is widely expected to revert to 1.9% in October.

 

November 16: France Unemployment Rate (Q3)

France recorded an unemployment rate of 9.5% in the second quarter of 2017, down marginally from 9.6% in the prior quarter, and representing the lowest jobless rate since the first quarter of 2012. Moreover, the nation’s employment rate rose to 65.3%, the highest recording since 1980. The unemployment rate is expected to remain unchanged at 9.5% in the third quarter.

 

November 22: Eurozone Consumer Confidence (November)

The Eurozone consumer confidence index rose to -1 in October, from -1.2 in September, representing the highest reading since April 2001. Expectations are for a slight decline in the index to almost -1.1 in November.

 

November 23: Germany Manufacturing PMI (November)

Germany’s Manufacturing PMI (Purchasing Managers’ Index) declined slightly to 60.5 in October, from 60.6 in September, which was the largest increase in manufacturing since April 2011. The market consensus for November calls for a decline to below 60.

 

November 24: Germany Business Climate Index (November)

Germany’s Business Climate Index declined to 115.2 in September, from 115.7 in August, and came in significantly below market expectations of a reading of 116. Despite the disappointment, estimates continue to be pegged above the 116 mark for November.

 

November 28: UK GDP Growth (Q3)

The UK economy expanded 1.5% in the second quarter of 2017, missing expectations of 1.7% growth and below the 1.8% recorded in the prior quarter. There are wide speculations of further deceleration in the third quarter to 1.4%.

 

November 29: Eurozone Business Confidence (November), Germany Inflation Rate (November), US GDP Growth (Q3)

Eurozone’s Business Climate Indicator rose to 1.34 in September, after inching up to 1.08 in August. The September reading handsomely beat expectations and was the highest since April 2011. The market consensus calls for declines in October and November to reach a reading below 1. Meanwhile, Germany’s inflation rate came in at 1.8% in September, unchanged from the August reading. The country’s inflation rate is widely expected to remain the same in October and November. In another part of the world, the US economy grew 3.1% in the second quarter of 2017 and the rate is expected to decelerate to 2% in the third quarter.

 

November 30: Eurozone Unemployment Rate (October)

The Eurozone unemployment rate came in at 9.1% in August, remaining unchanged from the July and June recordings. The rate is expected to remain at the same level in September and October.

 

 

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Breaking News: Bitcoin surges to a new all-time high after CME announcement

What was looking like a pretty standard sideward trading day for the market, Bitcoin suddenly decided to wake everyone up as once again it skyrocketed to a new all-time high of $6348.60.

The reason for the sudden move was the announcement by the CME Group that they are planning to launch bitcoin future contracts by the end of the year.    According to CNBC news, Terry Duffy the CEO of the CME Group said that “given the increasing client interest in the evolving cryptocurrency markets, we have decided to introduce a bitcoin futures contract”.

CME Group was not the first to announce their intention of launch a bitcoin future contract, the Chicago Board Options Exchange beat them to it by releasing a statement back in August about their intention to launch their own bitcoin coin future contract by either the end of this year or in early 2018.

However, the CME Group is the world’s leading and most diverse derivatives marketplace and it comprises of four key exchanges, the CME, BOT, NYMEX and Comex.

As well as that this announcement by the CME today, indicates that the real players in the market are beginning to take bitcoin seriously and there could be more that follow and start to embrace it. If that was to happen many analysts believe that higher highs for the alt-coin could keep on coming.

At the time of writing, bitcoin is currently trading at $6395.90.

 

Source: https://www.cnbc.com/2017/10/31/cme-plans-to-launch-bitcoin-futures-by-year-end.html

 

 

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Breaking News: Trumps former campaign manager to be charged over Russia

After months and months of speculation and rumours, it looks like it is finally happening.

 

According to the New York Times, Paul Manafort the former campaign manager for Donald Trump’s presidential campaign has been ordered to surrender as he will face charges connected to Russia interfering in the 2016 US election.  His business partner, Rick Gates is also due to be charged.

 

Over the weekend the media was a buzz with anticipation that arrests would be made today and it looks like both Manafort and Gates are to be the first people to charged over the so called “Trumpgate

 

Apparently, Manafort has been under investigation for several months and Special Counsel Robert Mueller’s probe into Russia’s meddling has intensified.

 

Manafort worked with the Trump campaign between June to August 2016 when he stepped away due to the fact that he had worked in the past with a pro- Russian party in Ukraine and questions were asked about his past business dealings.

 

Rick Gates worked alongside Manafort on the Trump presidential campaign and stayed on after Manafort stepped down, also being part of Trump’s president elect inaugural committee.

 

The nature of the charges that Manafort and Gates will face are currently unknown but needless to say this breaking story will have a lot more twist and turns to come.

 

The markets have so far shown no interest in this new development, with gold at the time of writing trading at $1271.09 and the USD index currently trading at 94.553.

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Another day another high: Bitcoin sets a new all-time high.

Seven days ago the bell of the ball which is bitcoin passed the $6,000 level for the first time in its existence.  Always wanting to impress, over the weekend bitcoin did it again and set a new all-time high of $6,306.81.   With it setting a new record the price of bitcoin is now up by more than 500% this year.

 

Having now fallen back slightly at the time of writing it is still trading around $6,149 per coin.

 

Bitcoins express train of success this year can be underlined by the surge in interest with Google Trends showing searches for information on the famous cryptocurrency is also at all-time highs.

 

However, despite bitcoins incredible bull run this year, it is not without its many detractors including the likes of legendary investor Warren Buffett who is one of many voices calling it a bubble simply waiting to happen.

Whatever the future has in store for the alt-coin, there is no doubt it will continue to be in the headlines and capture the imagination of the markets.

 

 

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Monday 30-10-2017 Outlook

Welcome to the weekly outlook starting this Monday 30 October. We’ll be looking at the week’s key economic events on the financial calendar covering Monday to Thursday. This week we see a lot of news out of the US with particular attention paid to the key interest rate decision on Wednesday. More central bank rate decisions are expected from Japan and the UK. Meanwhile Europe releases GDP and inflation data, and we get jobs numbers out of NZ.

 

Event: US Core Personal Consumption Expenditures (September)

Date: Monday 30 October 2017 at 12:30 GMT

Markets affected: EUR/USD, USD/JPY

Trending hashtags: #usd

 

With the economy back on track and the US dollar up against most of its counterparts. The world’s largest economy is looking very robust following Friday’s GDP result beating expectations as the economy expanded 3% in the third quarter. The question to be seen this Monday is whether that has translated to personal consumption expenditure for US citizens. Previous reading of Personal Consumption Expenditure showed a 0.2% monthly increase with a 1.4% rise against the previous year. Core Personal Consumption Expenditure rose 0.1% on a monthly basis and 1.3% on an annualised basis. Also, due on Monday are personal income figures which are expected to rise 0.4% from the previous change of 0.2% in September.

 

Event: Bank of Japan Interest Rate Decision

Date: Tuesday 31 October 2017 at 02:00 GMT

Markets affected: EUR/JPY, USD/JPY

Trending hashtags: #jpy, #yen, #interestrate

 

The Bank of Japan has maintained its super low negative interest rate at -0.1% and it is not anticipated to change at this time. The rate decision will come just after unemployment data which will be released on the evening before at 23:30 GMT, which last month sat at 2.8%. Following the interest rate decision, the BOJ will hold a press conference at 6:30 GMT that investors in the yen will be closely following.

 

Event: EU Gross Domestic Product (Q3)

Date: Tuesday 31 October 2017 at 10:00 GMT

Markets affected: EUR/USD, EUR/GBP

Trending hashtags: #eur, #gdp

 

The European Central Bank indicated its confidence in the region’s economy last week by announcing cuts to quantitative easing starting in January next year. In the second quarter of this year the Eurozone GDP grew 2.3%, a 0.6% improvement from the first quarter reading. The expectation for the preliminary reading for Q3 is for GDP to fall back to 2%.

 

Event: EU Consumer Price Index (October)

Date: Tuesday 31 October 2017 at 10:00 GMT

Markets affected: EUR/USD, EUR/GBP

Trending hashtags: #eur, #gdp

 

September’s Consumer Price Index came in at 1.5% year on year change with core CPI growing 1.3% on a yearly basis. This is a key inflation indicator which will be closely followed by the markets as the ECB plans to continue with its stimulus programme for another nine months at least.

 

Event: New Zealand Unemployment (September)

Date: Tuesday 31 October at 21:45 GMT

Markets affected: NZD/USD, AUD/NZD

Trending hashtags: #nzd, #jobs

 

NZ unemployment came in previously at 4.8% for the year with an employment change of -0.2% last month. The employment participation rate is sitting at 70% which is the total number of people in the labour force – either in work or looking for work. Since the new government was voted in a little over a week ago the kiwi dollar has been jittery around economic indicators. Last week’s disappointing trade data saw the NZD lose some ground.

 

Event: US ISM Manufacturing PMI (October)

Date: Wednesday 1 November 2017 at 14:00 GMT

Markets affected: EUR/USD, USD/JPY

Trending hashtags: #usd, #ism

 

The key ISM Manufacturing PMI is due out in the US on Wednesday. The previous reading was 60.8 and expectations are for a slight drop in October to 59.0. ISM Prices Paid are also due out and this is a measure of business sentiment on future inflation, the previous reading came in at 71.5.

 

Event: US Fed Interest Rate Decision

Date: Wednesday 1 November 2017 at 18:00 GMT

Markets affected: EUR/USD, USD/JPY

Trending hashtags: #usd, #interestrate

 

Whenever the Federal Reserve makes an announcement the markets tend to sit up and pay attention. So even though most are not expecting the Fed to make changes to the current 1.25% interest rate at this time, there will be focus on rhetoric about one more rate hike before the year ends.

 

Event: UK Bank of England Interest Rate Decision

Date: Thursday 02 November 2017 at 12:00 GMT

Markets affected: GBP/USD, EUR/GBP

Trending hashtags: #gbp, # interestrate

 

Rounding off the week of key central bank decisions on monetary policy, is the Bank of England’s interest rate decision. At their last meeting, the BOE members voted to maintain the low 0.25% interest rate, some of the committee noted that it may be time to reduce monetary stimulus procedures. The high inflation in the UK is certainly adding weight to those member’s votes.

 

 

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Breaking News: Independence is declared by Catalan parliament

In the shadow of Spanish government getting ready to impose direct rule, the Catalan regional parliament has voted 70 – 10 to declare its independence from Spain.

 

With threats coming from Spanish Prime Minister Mariano Rajoy saying that direct rule was essential to establish “law, democracy and stability” in the region, the Catalan Parliament has appeared to finally take some form of action.

 

The eyes will now be on Spain’s Senate, who are set to vote on enacting article 155 of the Spanish constitution which will give the government in Madrid all powers to take control of the Catalan region.

 

Market reaction has been fairly muted at current with the EUR/USD still under pressure from yesterday’s ECB press conference and the better than expected US GDP.  At the time of writing it is currently trading at 1.1615

 

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