Forex: Yen Indicated Strength Ahead of Core Machinery Orders

In Early Asia on Monday, the yen indicated a touch of strength ahead of core machinery orders as the Forex market gears up for what key central bank policy analyses and a possible formal announcement from Britain on plans to exit the European Union.

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In Early Asia on Monday, the yen indicated a touch of strength  ahead of core machinery orders as the Forex market gears up for what key central bank policy analyses and a possible formal announcement from Britain on plans to exit the European Union.

The U.S. dollar index, which gauges  the greenback’s strong point against a trade-weighted basket of six major currencies, was last cited at 101.38. On March 10 it reached 101.17, its lowest since February 28, during disappointment that wages in the U.S. only grew slowly.

In Japan, core machinery orders for January are set with a 3.3% decline seen YoY and a 0.5% increase expected month-on-month. USD/JPY was last quoted at 114.79, down 0.01%.

AUD/USD was last quoted at 0.7543, increase 0.01%. GBP/USD starts what could be a momentous week off at 1.2165, down 0.04%.

In the week onwards,  global financial markets will be busy with central bank meetings, with policy decisions set in the U.S., Japan, the U.K and Switzerland. Investors will also look out very carefully for headlines coming out of a two-day meeting of G20 central bankers and finance ministers in Germany for additional indications on the strength of the global economy and the future direction of monetary policy.

The previous week, the U.S. dollar retreated against a basket of the other major currencies on Friday, after the current U.S. employment report indicated that job growth beat expectations, but wage development stayed tepid.

The U.S. economy added 235,000 employments in February from the previous month, as the construction sector recorded its biggest  gain in almost  10 years due to unexpectedly warm weather, the Labor Department said Friday.

In January, the unemployment rate marked down to 4.7% from 4.8%, even as more people hurried into the labor market.

However, average hourly earnings increased just 0.2% in February from a year before, below expectations for a 0.3% increase. The small gain, boosted the YoY increase in earnings to 2.8%, disappointing some investors.

U.S. short-term interest rate futures slightly changed following the employment report, according to the report,  underscoring the likelihood that the U.S. central bank will increase rates in the coming week and two more times in 2017.

The euro soared late on Friday, after a report surfaced that the European Central Bank had discussed the probability of introducing a rate hike before the end of its quantitative easing program.

The report came fresh off the heels of a rather hawkish remarks from ECB President Mario Draghi at the bank’s post-policy meeting press conference on Thursday. Mr. Draghi said “there is no longer that sense of urgency” for the central bank to use ultra-loose monetary policy to attain its mandates.

It was confirmed by U.K. Prime Minister Theresa May during a press conference in Brussels that Britain would start exit negotiations with the EU by the end of this month.

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Crude Increases in Asia with U.S. Rig Count Figures Ahead

On Friday, crude prices increased a little in Asia as investors watched rig count figures in the U.S. for direction.

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On Friday, crude prices increased a little in Asia as investors watched rig count figures in the U.S. for direction.

On the New York Mercantile Exchange, delivery of  crude futures for May increase 0.15% to $52.69 a barrel, while on London’s Intercontinental Exchange,  Brent increased gains  0.13% $55.15 a barrel, 11:02PM ET.

In the meantime, market players turn attention to Baker Hughes rig count, scheduled to be released at 13:00 ET on Friday. The previous week, the Baker Hughes US oil rig count increased by 5, topping 600 for the first time since October 2015.

On Thursday, crude settled more than 2% lower overnight, as increasing U.S. crude stockpiles added to surplus concerns while Russia failed to initiate additional output reductions in January.

According to energy ministry data,  Russia’s February oil production was unmoved from January at 11.1 million barrels per day (bdp), with reductions remaining at 100,000, which is well below the output cuts pledged by Russia in an agreement with The Organization of the Petroleum Exporting Countries  (OPEC)  last November.

In November of the previous year, The Organization of the Petroleum Exporting Countries  and other producers, even Russia agreed to reduce production by approximately 1.8 million barrels per day (bpd) in an effort to combat the supply and demand balance that has pressured prices over the last two years.

Russia’s weak compliance with the agreed agreement to reduce output  came fresh off the heels of renewed concerns of record levels of U.S. crude stockpiles.

On Wednesday,  an Energy Information Agency (EIA) report indicated crude inventories in the United States increase for an eighth straight week to a record 520.2 million barrels for the week ended Feb 24.

“The build-up in U.S. crude oil inventories to record high levels, overshadowed a Reuters survey on Tuesday that found OPEC cut its oil output for a second month in February, following a record high compliance level by OPEC members in January,” according to the reports.

On Additional News

On Friday, oil markets rose  as the greenback  inched away from a multi week peak, however, prices are being held in check by unmoved Russian production for February, an indication of its weak compliance on a global arrangement to reduce supplies.

The greenback fell on Friday from its highest in seven weeks against a basket of currencies, although still holding close to a level that anchors  Brent crude near $55 a barrel and West Texas Intermediate (WTI) just under $53, 01:16AM ET.

Benchmark Brent crude futures increased 8 cents, or 0.2%, at $55.16 a barrel, as of 0559 GMT. It closed down $1.28, or 2.3%, in the prior session.

West Texas Intermediate (WTI) futures increased  7 cents, or 0.1%, to $52.68 a barrel after declining on Thursday to its lowest since Feb. 9. The U.S. benchmark finished in negative territory in the past three terms.

On Thursday, the greenback increased after hawkish remarks  by a U.S. Fed Reserve official motivated investors to anticipate a near-term interest rate hike.

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Dollar Increase with March Fed Rate Hike in View

On Thursday, the greenback soared a seven-week peak on increasing indications given by Fed Reserve Representatives that the U.S. central bank is extremely considering raising interest rates this month.

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On Thursday, the greenback soared a  seven-week peak on increasing indications given by Fed Reserve Representatives  that the U.S. central bank is extremely considering raising interest rates this month.

Later on Wednesday, Fed  Reserve Governor Lael Brainard stated a developing global economy and a solid U.S. recovery mean it will be “appropriate soon” for the Fed rate hike.

The dollar index, which gauges the dollar against a basket of six major currencies, was a little higher at 101.91. The index increased to 101.97 on Wednesday, its highest since Jan. 11.

On Tuesday, two influential Fed officials, William Dudley and John Williams, stimulated greenback bulls with remarks that suggested rate-setters are concerned about waiting too long in the face of the pending economic stimulus from Washington.

“The Fed is likely to raise interest rates this month unless the U.S. jobs data due next week is bad,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

Futures traders are now expecting a 66% probability of a Fed hike in March, up from 35% on Wednesday, according to the CME Group’s FedWatch Tool.

U.S. President Donald Trump’s long-awaited speech on Tuesday failed to give specific information on his economic ideas, but outlined broad tax reductions  and a $1 trillion public-private initiative to rebuild degraded roads and bridges.

“Investors liked that Trump was behaving well during his speech, although it lacked specifics in policies,” said Daiwa’s Ishizuki.

The greenback  increased up 0.3 percent, against its Japanese counterpart  at 114.04 yen. The dollar reached a two-week peak  of 114.16 yen earlier in the day.

A widening of U.S.-Japan interest rate differentials supported the dollar, as U.S. Treasury yields jumped on an increased prospect for a March rate hike.

The U.S. two-year yield increased near a more than seven-year high of 1.308% touched on Wednesday. The benchmark 10-year Treasury yield was also close to a two-week peak,the last standing at 2.461 percent.

However, some analysts warned that the greenback could decline in spite of the widening interest rate differentials should stocks retreat.

Investors are closely observing speeches from Fed Chair Janet Yellen and Vice Chair Stanley Fischer on Friday for additional policy indications.

The U.S. non-farm payrolls next Friday is another critical factor to decide on the probability of a March rate hike.

Sterling and the Canadian dollar weakened compared to the greenback to their lowest levels since Jan. 20.

On Wednesday, Canada’s central bank held rates steady, striking a cautious tone on the “significant uncertainties” facing the economy.

The dollar increased near a six-week high against the loonie, last standing at 1.3356 Canadian dollars.

Sterling dropped to a six-week low of $1.2261 as unsatisfactory economic data on Wednesday added to political nerves that have started to influence on the currency again after last year’s Brexit vote.

The euro declined 0.2% at $1.0529. On Wednesday, The common currency plunged to a one-week low of $1.0514 against the greenback.

The Australian dollar slumped on weaker than expected trade statistics, plunging 0.3 percent to $0.7654.

Australia’s trade excess decreased unexpectedly in January, though the quarterly current account might still edge into the black for the first time since the mid-1970s.

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Gold Prices Declines as Trump Addresses Congress on Policy Plans

On Wednesday, gold plunged in Asia as Donald Trump presented a strong law-and-order speech to the U.S. Congress that included a restriction on illegal immigration and restated call for wall on the border with Mexico, while calling for a massive repair of the nation’s tax system and increased spending on infrastructure and defense.

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On Wednesday, gold plunged in Asia as Donald Trump presented a strong law-and-order speech to the U.S. Congress that included a restriction on illegal immigration and restated call for wall on the border with Mexico, while calling for a massive repair of the nation’s tax system and increased spending on infrastructure and defense.

The Trump list of things also included a call for lower drug prices and  undetermined new healthcare coverage plan.

Delivery of gold in May on the Comex division of the New York Mercantile Exchange fell 0.51% to $1,247.45 troy ounce.

Also on the Comex,  delivery of silver futures for May  declined 0.58% to $18.362 a troy ounce. Copper futures increased  0.29% to $2.723 a pound, 10:03PM ET.

Investors noted positive  manufacturing figures from China that established the stage for global growth hopes.

On Tuesday, gold Futures traded lower overnight, as the greenback  moved off session lows, ahead of President Trump’s speech to congress. In spite of a mixed batch of U.S. economic data, gold futures fight for direction in mid-afternoon trade, as President Trump’s address to congress on Tuesday at 9 PM EST remained front and center.

In the final three months of 2016 gross domestic product (GDP) increased at a 1.9% annual rate, the Commerce Department stated on Tuesday its second estimate for the period. Analysts expected a 2.1% yearly rate increase.

The Consumer Confidence Index, which gauges  consumers’ assessment of the latest conditions in the U.S., touched 114.8 in February, according to the statistics from The Conference Board. Economist anticipated the Consumer Confidence index to hit 111 in February.

The mixed bag of economic statistics came during renewed expectations of a March interest rate hike, after Dallas Fed President Robert Kaplan on Monday restated his outlook that a rate hike should happen sooner rather than later.

Fed fund futures priced in approximately a 40% probability of a rate hike in March, according to the reports.

Gold is sensitive to changes in U.S. interest rates, which lift the opportunity cost of holding non-yielding assets like bullion, while increasing the dollar in which it is priced.

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Oil Edge Up in Supply Cuts, But Increasing U.S. Production Caps Gains

On Monday, oil prices inched higher with Brent oil set to increase for five out of seven sessions as a worldwide supply surplus appears to ease, but increasing U.S. output limited gains.

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On Monday, oil prices inched higher with Brent oil set to increase for five out of seven sessions as a worldwide supply surplus appears to ease, but increasing U.S. output limited gains.

Brent crude oil (LCOc1) climbed 0.2 percent to $56.09 a barrel, while U.S. West Texas Intermediate (CLc1) added 0.1% to $54.04 a barrel, 09:59PM ET.

On Friday, oil prices plunged after U.S. Energy Information Administration data indicated U.S. crude inventories increase for a seventh straight week.

However, the market has been supported within a tight $4 to $5 range since November, when the Organization of the Petroleum Exporting Countries (OPEC) and other producers decided to reduce output.

“EIA data showed stocks rose 564,000 barrels to 518.7 million last week,” ANZ said in a note.

“However, it was the lowest increase over the past couple of months. If this trend of lower imports and smaller gains in inventories persists over the coming weeks, it would suggest that the OPEC, led production cuts are starting to have an impact.”

The  Organization of the Petroleum Exporting Countries (OPEC) record compliance with the agreement has surprised the market, and the biggest laggards, the United Arab Emirates and Iraq have pledged to catch up with their objectives.

The International Energy Agency put OPEC’s average agreement at a record 90% in January, and based on a Reuters average of production surveys, it stands at 88%.

Saudi Arabia has offered to cut oil output if rival Iran caps its own production this year, four sources aware with the discussions stated, as Riyadh tries to strike an elusive Organization of the Petroleum Exporting Countries (OPEC )agreement to curtail supply and increase prices.

The U.S. Commodity Futures Trading Commission (CFTC) stated on Friday, money managers raised their net long U.S. crude futures and options positions in the week to Feb. 21, to the highest on record, based on data going back to at least 2009.

“The market is trading in a range. OPEC supply cuts are putting a base under the market at this stage,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

On the technical front, Brent oil may break support at $55.93 per barrel and decline more towards the next support at $54.81, as its consolidation within a wedge has not finished, according to the reports.

U.S. oil may  further  decline to support at $53.37 per barrel, as suggested by a Fibonacci projection analysis and a rising channel.

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Oil Clings to Gains as Stockpiles Increases for Seventh Week

On Friday, oil prices held gains on data indicating U.S. stockpiles increase for a seventh straight week, however, at a pace that was well below expectations, and news of oil being sold out of storage in Southeast Asia.

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On Friday, oil prices held gains on data indicating U.S. stockpiles increase for a seventh straight week, however, at a pace that was well below expectations, and news  of oil being sold out of storage in Southeast Asia.

U.S. West Texas Intermediate (CLc1) was unmoved at $54.45 a barrel by 0526 GMT (12:26 a.m. ET), dragging back from early losses. West Texas Intermediate were on track for a weekly increase of approximately 2%, which would be its biggest so far this year.

Brent crude (LCOc1) increased  3 cents at $56.61 and was on track for a weekly increase of about 1.4 percent, 12:46AM ET.

U.S. crude inventories increased  by 564,000 barrels in the week to Feb. 17, up for a seventh week, even though below analysts’ expectations for a surge  of 3.5 million barrels, the Energy Information Administration (EIA) stated.

The Organization of the Petroleum Exporting Countries (OPEC) and producers, including Russia, have guaranteed to reduce output  by around 1.8 million barrels per day (bpd) to tackle a global surplus that has kept prices low since 2014.

Although OPEC seems to be sticking to its agreement, producers that were not part of the contract, mainly U.S. shale drillers, have increased production, driving the growth in inventories in the United States, the world’s biggest oil consumer.

“Current oil prices are neither sustainable for OPEC or the industry,” AB Bernstein said in a note on Friday. “As such, inventories will have to fall, which we expect will be clearer in the spring after the seasonal build.”

Indications are emerging that this is happening in Asia with traders selling oil held in tankers anchored off Malaysia, Singapore and Indonesia, according to the reports on Friday.

This month, more than 12 million barrels of oil have been taken out of storage in tankers berthed off Southeast Asian countries, shipping data in Thomson Reuters Eikon shows.

Traders have been profiting from a market feature identified as contango, where prices for later delivery are higher than those for immediate dispatch. However,  the future premium is declining and future prices may slip below spot prices, known as backwardation.

“Tightening fundamentals will push the crude market into backwardation in the coming months,” BMI Research said in a note. This “will benefit participants in the paper market but hamper the profits of oil traders who are unable to exploit the cash and carry arbitrage.”

On Additional News

On Friday, crude prices drifted weaker in Asia with U.S. rig count figures the next piece of the weekly supply and demand picture in the U.S. ahead.

On the New York Mercantile Exchange, delivery of crude futures for April eased 0.17% to $54.36 a barrel, while on London’s Intercontinental Exchange, Brent was last quoted at $56.49 a barrel.

On Friday, weekly figures from oilfield services provider Baker Hughes are due on U.S. rig activity. The previous  week, Baker Hughes stated the figure of active U.S. rigs drilling for oil increase by six , the 5th weekly surges in a row. That brought the total amount to 597, the most since November 2015.

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Dollar Sneaks Lower ahead of Fed Minutes

On Wednesday, the U.S. greenback glided lower compared to major currencies, in advance of the January 31 to February 1 Fed Reserve Open Committee (FOMC) minutes of meetings, scheduled to be released at 14:00 ET.

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On Wednesday, the U.S. greenback glided lower compared to major currencies, in advance of the January 31 to February 1 Fed Reserve Open  Committee (FOMC) minutes of meetings, scheduled to be released at 14:00 ET.

The U.S. dollar index, which gauges  the greenback’s strong point against a trade-weighted basket of six major currencies, was steady at 101.38, off the prior session’s one-week peak of 101.72, 02:21AM ET

In spite of a stronger U.S. existing home sales print for January of 5.69 million compared to expectations of 5.51 million, the dollar index failed to add to gains in the early morning U.S. session, as market players anticipate the minutes of the Fed Reserve Open  Committee (FOMC) for direction.

“Several  expect a hawkish tone among policymakers, after several Fed members’, including Fed Chief Janet Yellen, indicated that the Fed should tighten interest rates sooner rather, should the U.S. economy continues  to show robust growth,”  according to the reports.

Against the backdrop of optimistic remarks from Fed members  regarding a March rate hike, Minneapolis Fed President Neel Kashkari stated on Tuesday, the U.S. labor market has “more room to run”, an indication that the  Fed may not hike in March.

Somewhere else, GBP/USD declined 0.21% to $1.244, after the U.K. Office for National Statistics stated that gross domestic product (GDP) extended by 2% year-on-year, compared to expectations for a 2.2% increased.

The euro improved from session lows to trade at $1.055 up 0.13%, after the single currency shrugged off concerns over France’s presidential election campaign while EUR/GBP gained 0.34% to trade at 0.8478.  USD/JPY traded lower at $113.46, down 0.18%.

In the meantime, the Russian USD/RUB plunged more than 1% against the greenback to trade at 57.97, after a report exposed that Russia’s unemployment rate marked up to 5.6% in January, up from 5.3% in December.

On Additional News

On Thursday, the Australian dollar inched lower against its U.S. counterpart, after the announcement of downbeat Australian data, although the New Zealand dollar inched higher after the minutes of the Fed Reserve’s latest policy meeting.  AUD/USD eased 0.09% to 0.7694, 02:21AM ET.

The Australian Bureau of Statistics earlier reported that private capital expenditure dropped 2.1% in the 4th quarter, compared to expectations for a 0.5% drop. Private capital expenditure dropped 3.3% in the 3rd quarter of 2016, whose figure was revised from a previously estimated 4.0% decline.

NZD/USD added 0.19% to trade at 0.7204, the highest since February 20.

Later on  Wednesday, the minutes of the Fed’s January policy meeting indicated that policymakers thought it may be suitable to increase  interest rates once more “fairly soon.”

However, the minutes also shown the central bank’s improbability over the lack of clarity of the Trump administration’s economic program, which limited the dollar’s gains.

The minutes came after Fed Chair Janet Yellen stated the previous  week that a rate increase would be right at one of the Fed’s upcoming meetings.

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