Oil prices and the US Stock Market jump up today based on President Trump saying he is planning on meeting with Chinese Vice Premier Liu He on Friday. Yesterday quotes corrected down amid the EIA report, according to which US oil inventories rose for the fourth consecutive week, this time by 2.927 million to 425.569 million barrels. The production volume in the USA also increased, by 200K, to 12.6 million barrels per day. Today’s growth is supported by investors’ hopes for a limited trade agreement between the US and China.
The US currency today is weakening against the pound and the euro but is strengthening against the Japanese yen.
The dollar is pressured by the publication of the minutes of the last Fed meeting. Some FOMC members have expressed concern that markets expect a greater reduction in rates than the regulator intends to commit. According to officials, it may be necessary to coordinate the positions of the Fed and market participants. This may indicate the readiness of the FOMC to further reduce rates. An additional weakening of USD is facilitated by data on the US inflation for September. The consumer price index remained the same (1.7%) instead of the expected growth YoY, and slowed down from 0.1% to 0.0% MoM. The core CPI remained at 2.4% YoY, and slowed down from 0.3% to 0.1% MoM.
Today, the market is waiting for the results of the next round of the US-China trade negotiations. Opinions about their outcome are contradictory. Some observers believe that Washington may make a partial deal with Beijing by exchanging a delay or canceling the introduction of new tariffs for China to additional purchases of US agricultural products. On the other hand, the Chinese media reports about Deputy Prime Minister Liu He leaving the US ahead of schedule and fly to China today make some investors doubt the success of the negotiations.
The euro is strengthening today against its main competitors – the pound, the yen, and the US dollar.
The euro is strengthening amid the publication of the Fed’s protocols, which allow investors to hope for a continued reduction in rates, and market expectations for a partial trade agreement between the PRC and the USA. Meanwhile, the August data on German trade released today were weak. Imports increased by 0.5%, but exports fell by 1.8% against the forecast of 1.0%, and the surplus of the trade balance decreased by EUR 18.1 billion. The largest decline in supplies (by 4.8%) occurred outside the EU countries, including China. Most likely, the German GDP slowdown will continue, which will negatively affect the European economy in general.
Today, the pound is weakening against the euro but is strengthening against the yen and the US dollar.
Investors are focused on the publication of GDP data and the situation around Brexit. GDP showed positive dynamics, exceeding market expectations. YoY, it grew to 1.1% instead of the expected 0.9%, and MoM – to 0.3% (with a forecast of 0.1%). Negotiations are ongoing for a new Brexit deal. Today, British Prime Minister Boris Johnson is discussing it with his Irish counterpart Leo Varadkar. Johnson said he remains moderately optimistic about the deal.
The Japanese yen is weakening today against its main competitors – the euro, the pound, and the US dollar.
The yen is losing ground amid weak data on orders for machinery and equipment. In August, the volume of orders decreased by 14.5%, which is the lowest indicator in the last five years. These numbers confirm growing caution for Japanese companies regarding further investments.
AUD today is generally strengthening to the main competitors – the US dollar, the euro, the yen, and the pound.
In the absence of significant releases, the movement of the Australian currency is technical. Today, the market is waiting for the results of the next round of the US-China trade negotiations. Their failure can put serious pressure on the position of all commodity currencies, including the Australian dollar.