Weekly Outlook Ending on 25th March 2017
Currencies:
Dollar Falls on U.S Data.
The dollar fell against the other major currencies on Friday, as the previous session’s downbeat U.S. economic reports and the Federal Reserve’s decision to hold interest rates continued to weigh. Sentiment on the greenback remained vulnerable after the U.S. Department of Labor said on Thursday that the number of individuals filing for initial jobless benefits in the week ending June 11 increased by 13,000 to 277,000.In addition, the U.S. Commerce Department said consumer prices rose 0.2% in May, compared to expectations for a 0.3% gain. Year-over- year, consumer prices were 1.0% higher last month, below expectations for a 1.1% gain. Investors were now eyeing the release of data on U.S. building permits and housing starts later in the day, for further indications on the strength of the economy. The yen had rallied against the dollar after Bank of Japan officials voted on Thursday to continue expanding the monetary base at an annual rate of about ¥80 billion. At the conclusion of its monetary policy meeting on Thursday, the BoJ also flagged the EU referendum on June 23 as a key geopolitical threat to the Japanese economy, along with the “European debt problem”. The decision came after the Fed also cited the referendum as a factor in its decision on Wednesday to keep interest rates on hold. The dollar had already weakened against the other major currencies when the Fed kept rates unchanged and lowered forecasts for how much they expect to hike interest rates in the next few years..
Euro recovered all eyes on Brexit Proceedings.
Euro rose in early London trading on Friday and the euro added to gains in the past 24 hours on expectations that the killing of a pro-EU British lawmaker may alter the balance of opinion in Britain's referendum on EU membership. Speculation was rife among traders after the murder of Jo Cox on Thursday that Prime Minister David Cameron might push back the vote due to take place on June 23.There has been no such signal from Downing Street, but either way some traders think the murder will turn the tide of public opinion after a series of polls showed the "Leave" campaign moving ahead. Concerns Britain would send a shockwave through global financial markets and European politics by voting to leave the 28-country bloc have prompted a flood of money into traditional safe havens such as the yen and the Swiss franc. “For now the bounce is only really visible in sterling," BNP Paribas strategist Michael Sneyd said. “The biggest move this week has been the shift in Fed expectations, which we have seen in surge in the yen against the dollar. What's interesting is the euro has not reacted, which suggests there has been an increase in risk on the euro itself. “By 1120 GMT, sterling was up 0.6 percent at $1.4276, almost 3 cents above Thursday's lows. It also gained 0.2 percent to 78.85 pence per euro. The single currency firmed a third of a percent to $1.1257 from a two-week low of $1.1131.The cost of hedging against volatility in sterling and the euro over the next week hit multi-year highs, however, reflecting the risk of a sharp move either way for both next Thursday. The yen also remained within sight of almost two-year highs of 103.55 yen hit against the dollar on Thursday. “Past the date of the referendum, asset prices are likely to move sharply, regardless of the outcome of the referendum," Goldman Sachs strategists said in a note on Friday.
Pound ends on a positive node.
Pound rallied more than 1% on Friday, as momentum surrounding the "Leave" campaign slowed for the time being after officials suspended Brexit-related activities for a second straight day following the tragic murder of a British Parliament member. The currency pair traded in a broad range between 1.4199 and 1.4388 before settling at 1.4207, up 1.10% on the session. With the sharp gains, the Pound Sterling enjoyed its strongest one-day move against the dollar in more than a month. At session-lows on Thursday, the pair tested 1.40, its lowest level since early-March. The Pound has still slid more than 1.25% over the last week amid mounting concerns that voters could support a referendum to leave the European Union next Thursday. GBP/USD likely gained support at 1.3852, the low from Feb. 26 and was met with resistance at 1.4693, the high from May 27.
On Friday, a series of events ahead of next week's Brexit referendum were cancelled, as U.K. residents continued to mourn Jo Cox, a Labor Party member who was shot and stabbed to death in North Yorkshire a day earlier. Cox, who was elected to the House of Commons last year, had openly campaigned for the "Remain" camp in recent weeks. It marked the first killing of a Parliament member in two decades. Out of respect for Cox, several public opinion polls and a report by the International Monetary Fund were delayed until the weekend. Voters in the U.K. appear to be evenly split on whether to support a departure by the U.K. from the European Union. While the "Remain" campaign held as much as a 70-30 leads several months ago, the "Leave," vote has surged ahead in several prominent polls this week. Still, the British sportsbook Betfair helped assuage concerns of a Brexit by reporting that approximately 65% of the wagers it has handled have come in for the "Remain," side. In recent weeks, British prime minister David Cameron, Federal Reserve chair Janet Yellen, IMF managing director Christine Lagarde and Bank of England governor Mark Carney have warned of the serious ramifications a Brexit could have on global financial markets. On the other end, House of Commons Leader Chris Grayling, Culture Secretary John Whittingdale and former London mayor Boris Johnson have shown support for the Leave movement.
Commodities:
Gold surges to high and closed $1243.
Gold prices slid lower on Friday, as traders locked in profits from the precious metal’s rally to 23-month highs on Thursday, sparked by a broadly weaker U.S. dollar. On the Comex division of the New York Mercantile Exchange, gold futures for August delivery lost 1.03% to $1,285.05.The August contract ended Thursday’s session 0.78% higher at $1,298.40 an ounce. Futures were likely to find support at $1,273.0, the low of June 13 and resistance at $1,316.40, Thursday’s high and a 23-month peak
The U.S. dollar weakened broadly after the Federal Reserve kept rates unchanged at the conclusion of its two-day policy meeting on Wednesday and lowered forecasts for how much they expect to hike interest rates in the next few years. Gold is sensitive to moves in U.S. rates, as a rise would lift the opportunity cost of holding non-yielding assets such as bullion. Sentiment on the greenback also remained vulnerable after the U.S. Department of Labor said on Thursday that the number of individuals filing for initial jobless benefits in the week ending June 11 increased by 13,000 to 277,000.In addition, the U.S. Commerce Department said consumer prices rose 0.2% in May, compared to expectations for a 0.3% gain. Year-over- year, consumer prices were 1.0% higher last month, below expectations for a 1.1% gain. Investors were now eyeing the release of data on U.S. building permits and housing starts later in the day, for further indications on the strength of the economy. Prices of the precious metal are up more than 8% so far in June, as market players pushed back expectations for the next U.S. rate hike and amid mounting concerns the U.K. will vote to leave the European Union in a referendum next week. A series of recent opinion polls showed a big lead for the "leave" camp ahead of the country's June 23 referendum.
Crude erases some losses on Weekend.
Crude halted a six-day losing streak on Friday, closing near session-highs, after shrugging off reports of a third consecutive weekly gain among U.S. oil rigs. On the New York Mercantile Exchange, WTI crude for July delivery traded between $45.84 and $48.06 a barrel before closing at $47.98, up $1.77 or 3.83% on the session. On the Intercontinental Exchange (ICE), Brent crude for August delivery wavered between $47.01 and $49.23 a barrel, before settling at $49.19, up $2.00 or 4.24% on the day. Despite the sharp gains, both the international and U.S. benchmarks of crude are each down by approximately 5% from multi-month highs hit last week. WTI crude has gained more than 80% in value since slumping to 13-year lows at $26.05 a barrel on February 11.On Friday afternoon, oil services firm Baker Hughes said in its weekly rig count report that U.S. oil rigs last week rose by nine to 337 for the week ending on June 10. It marked the third straight of weekly increases, the longest since last August. At the same time, the gas rig count inched up by one last week to 87, boosting the overall count by 10 to 424. The overall rig count is still down by 433 in comparison with the total from the same week last year. Any gains in U.S. oil rigs typically provide lagging indications that production nationwide is about to increase. Over the last year, U.S. output has fallen sharply as high-cost shale producers were forced offline due to a prolonged downturn in prices. Last week, production in the U.S. fell by 29,000 barrels per day to 8.716 million barrels per day, remaining down by approximately 1 million bpd from its level 12 months ago. Last June, U.S. crude output eclipsed 9.6 million bpd to hit its highest level in more than 40 years. Since reaching a peak of $115 a barrel in June 14, crude prices have tumbled more than 50% amid a glut of oversupply on global energy markets. Earlier this week, analysts from Goldman Sachs Group Inc. said they viewed the price recovery in oil "as fragile," reflecting recent production delays in Canada and Nigeria, as well as larger than expected output among top producers in the Persian Gulf. While Goldman noted that not all producers will be able to ramp up production at higher prices, the analysts emphasized that some of the more capitalized ones might have the ability to come back online.
Stocks
It was a negative week for U.S. equities. Starting with the U.S. stocks; Dow Jones in loss of 201 points and 1.17%. Nasdaq Composite loss 1.53% and down by 52 point. S&P 500 down by 25 points for the week.
Coming to European counterparts, UK’s FTSE 100 up by 70 points and 1.15%. German DAX 30 also lost 528 points and 5.73%. Additionally French CAC 40 gain 11 points and lost 0.17% on the weekly basis.
In commodities Gold surged $47 and 3.63% while Crude Oil up by $1.40 and 2.43% over the week.
Euro gain 1.27% over the week while Yen gain 4.60%. Pound loss 1.51% & Ice dollar index got 0.35% on this week.
Note: Here all the currencies are measured in percentage against the U.S. dollar