Oil Futures End Higher, But Post Sharp Weekly Loss

Trading 19 oct 2018 Commentaire »

Crude oil futures ended higher on Friday with investors weighing the possible impact of U.S. sanctions on Iran's oil exports on crude supply in the market.

Oil was also supported by data showing refinery throughput in China rising to a record high of 12.49 million barrels per day in September, after some independent plants restarted operations.

Crude oil futures for November ended up $0.47, or 0.7%, at $69.12 a barrel. On Thursday, crude oil futures ended at a five-week low at $68.65 a barrel, losing $1.10, or 1.6%.

For the week, oil futures shed about 3.1%.

The sanctions on Iran's oil exports come into force on November 4.

Meanwhile, U.S. politicians have spoken of sanctioning Saudi officials found culpable in the killing of U.S. journalist Jamal Khashoggi. The Saudi kingdom has stated that it would respond with greater action, if it receives any action from the U.S.

U.S. President Donald Trump said on Thursday that he presumes Khashoggi had likely been killed and that the U.S. response to Saudi Arabia will likely be very severe.

Oil prices tumbled in the previous two sessions, after data from the U.S. Energy Information Administration showed a much higher than expected increase in crude inventories last week. Traders were also speculating a likely drop in crude demand due to the ongoing trade disputes between the U.S. and China, and on concerns about the outlook for global economic growth.


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Treasuries Move To The Downside Amid Quiet Trading Day

Trading 19 oct 2018 Commentaire »

After ending the previous session roughly flat, treasuries showed a modest move to the downside during the trading day on Friday.

Bond prices moved lower early in the session and remained stuck in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.3 basis points to 3.198 percent.

The early weakness among treasuries came on the heels of a rally by Chinese stocks, which rebounded strongly from an initial move to the downside despite disappointing GDP data.

Data showed Chinese GDP climbed an annual 6.5 percent in the third quarter, shy of estimates for 6.6 percent and down from 6.7 percent in the previous quarter.

However, investors reacted positively after three top Chinese financial regulators stepped in to bolster investor confidence.

The heads of the People's Bank of China, the Securities Regulatory Commission and the Banking and Insurance Regulatory Commission all issued statements expressing support for the markets.

Meanwhile, traders largely shrugged off a report from the National Association of Realtors showing a much steeper than expected drop in existing home sales in the month of September.

NAR said existing home sales plunged by 3.4 percent to an annual rate of 5.15 million in September after edging down by 0.2 percent to a revised rate of 5.33 million in August. Economists had expected existing home sales to drop by 0.7 percent.

With the much bigger than expected decrease, existing home sales slumped to their lowest annual rate since November of 2015.

The U.S. economic calendar for next week is relatively quiet, although reports on new home sales, durable goods orders, and consumer sentiment are still likely to attract attention.

Traders are also likely to keep an eye on the Federal Reserve's Beige Book as well as speeches by several Fed officials.


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Gold Ends Slightly Lower As Equities Rebound

Trading 19 oct 2018 Commentaire »

Despite the U.S. dollar losing ground against some major currencies, gold prices edged lower on Friday as equities rebounded after a setback in the previous session.

The dollar index drifted down to 95.42, giving up about 0.3%. On Wall Street, stocks rebounded after an early decline. Upbeat results from Procter & Gamble, American Express and Honeywell drove stock prices up on Wall Street.

Shrugging off concerns about trade disputes and geopolitical tensions, investors have been focusing on earnings reports on Friday.

Gold futures for December ended down $1.00, or 0.1%, at $1,229.10 an ounce. On Thursday, gold futures ended up $2.70, or 0.20%, at $1,230.10 an ounce.

For the week, gold futures gained nearly 1%, moving higher for a third straight week.

Silver futures for December ended down $0,046, at $14.650 per million btu.

Copper futures for December settled at $2.7780 an ounce, gaining $0.0315 for the session.

In economic news, a report from the National Association of Realtors showing a much steeper than expected drop in existing home sales in the month of September.

NAR said existing home sales plunged by 3.4 percent to an annual rate of 5.15 million in September after edging down by 0.2 percent to a revised rate of 5.33 million in August. Economists had expected existing home sales to drop by 0.7 percent.

With the much bigger than expected decrease, existing home sales slumped to their lowest annual rate since November of 2015.


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Dollar Trading Mixed Ahead Of The Weekend

Trading 19 oct 2018 Commentaire »

The dollar is turning in a mixed performance against its major rivals Friday afternoon. The buck is losing ground against its major European rivals, despite concerns over the Italian budget. Meanwhile, the dollar is rising against the Japanese Yen.

After a month of stagnation in August, the National Association of Realtors released a report on Friday showing existing home sales in the U.S. tumbled by much more than anticipated in the month of September.

NAR said existing home sales plunged by 3.4 percent to an annual rate of 5.15 million in September after edging down by 0.2 percent to a revised rate of 5.33 million in August.

Economists had expected existing home sales to drop by 0.7 percent to a rate of 5.30 million from the 5.34 million originally reported for the previous month.

The European Commission said Italy's 2019 budget draft is in serious breach of EU budget rules.

In a letter to the Italian government, Commissioners Valdis Dombrovskis and Pierre Moscovici wrote that the government's budget plans represent "an obvious significant deviation" from recommendations adopted by the Council for 2019.

"With Italy's government debt standing at around 130% of GDP, our preliminary assessment also indicates that Italy's plans would not ensure compliance with the debt reduction benchmark agreed by all Member States," the letter stated.

The dollar rose to an early high of $1.1433 against the Euro Friday, but has since retreated to around $1.1510.

Euro area current account surplus increased in August from the previous month, preliminary data from the European Central Bank showed on Friday. The current account surplus rose to EUR 24 billion from EUR 19 billion in July. A year ago, the surplus was EUR 39 billion.

The buck has dropped to around $1.3065 against the pound sterling Friday afternoon, from an early high of $1.3011.

The UK budget deficit reached its lowest September level in 11 years, data from the Office for National Statistics showed Friday. Public sector net borrowing excluding public sector banks was GBP 4.1 billion, which was GBP 0.8 billion less than in September 2017. This was the lowest September deficit since 2007.

The greenback has climbed to around Y112.530 against the Japanese Yen Friday afternoon, from an early low of Y112.192.

Consumer prices in Japan were up 1.2 percent on year in September, the Ministry of Internal Affairs and Communication said on Friday. That was shy of expectations for an increase of 1.3 percent, which would have been unchanged from the August reading.


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Belgium Consumer Confidence At 6-month High

Trading 19 oct 2018 Commentaire »

Belgium's consumer confidence advanced to a six-month high in October after deteriorating for the past two months, survey data from the National Bank of Belgium showed Friday.

The consumer confidence index rose to 1 in October, after a flat reading in September. In August, the reading was -3.

The latest reading was the highest since April, when the score was 2.

The improvement in consumer confidence reflected the firming up of household savings situation over the next twelve months.

Consumer expectations regarding the national economy deteriorated further, while the view on the unemployment situation improved.

Overall, consumers' opinions were more mixed, the bank said.

The optimistic outlook regarding the expected trend in unemployment in Belgium has not been reflected in the outlook for the general economic situation, the bank added.


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Loonie Weakens After Disappointing Canada Inflation, Retail Sales Data

Trading 19 oct 2018 Commentaire »

The Canadian dollar declined against its major counterparts in the European session on Friday, following the release of reports showing unexpected decline in nation's retail sales for August and consumer inflation for September.

Data from Statistics Canada showed that consumer inflation deteriorated 0.1 percent on a seasonally adjusted monthly basis in September following a 0.1 uptick in the previous month. Economists were looking for a 0.1 percent gain.

Core inflation, excluding food and energy, fell 0.1 percent from last month, when prices grew 0.2 percent.

Separate data showed that Canada's retail sales fell unexpectedly in August.

Retail sales declined 0.1 percent to C$50.8 billion in August.

That was down from forecasts for a 0.3 percent gain. The July figure was revised down to a 0.2 percent increase, from the originally reported 0.3 percent.

Core retail sales, excluding motor vehicle and parts dealers, declined 0.4 percent, in contrast to forecasts for 0.1 percent increase.

This follows a revised 0.8 percent advance in July, which was originally reported as 0.9 percent.

The currency was trading in a positive territory against its major counterparts in the Asian session, with the exception of the aussie.

The loonie declined to a 3-day low of 1.5039 against the euro, after rising to a 9-day high of 1.4931 at 5:30 am ET.

Preliminary data from the European Central Bank showed that euro area current account surplus increased in August from the previous month.

The current account surplus rose to EUR 24 billion from EUR 19 billion in July. A year ago, the surplus was EUR 39 billion.

Reversing from an early high of 0.9270 against the aussie, the loonie weakened to a 3-week low of 0.9366.

Data from the Ministry of Internal Affairs and Communication showed that Japan consumer inflation fell 1.2 percent on year in September.

That was shy of expectations for an increase of 1.3 percent, which would have been unchanged from the August reading.

The loonie slipped to more than a 5-week low of 1.3120 against the greenback, off its early high of 1.3028.

Having advanced to 86.37 against the yen at 7:15 am ET, the loonie reversed direction and retreated to 85.68.

Looking ahead, Bank of England Governor Mark Carney will speak at the Economic Club of New York at 11:30 am ET.

Federal Reserve Bank of Atlanta President Raphael Bostic speaks about the economic outlook in Georgia at 12:00 pm ET.


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U.S. Existing Home Sales Plunge To Nearly Three-Year Low In September

Trading 19 oct 2018 Commentaire »

After a month of stagnation in August, the National Association of Realtors released a report on Friday showing existing home sales in the U.S. tumbled by much more than anticipated in the month of September.

NAR said existing home sales plunged by 3.4 percent to an annual rate of 5.15 million in September after edging down by 0.2 percent to a revised rate of 5.33 million in August.

Economists had expected existing home sales to drop by 0.7 percent to a rate of 5.30 million from the 5.34 million originally reported for the previous month.

With the much bigger than expected decrease, existing home sales slumped to their lowest annual rate since November of 2015.

"A decade's high mortgage rates are preventing consumers from making quick decisions on home purchases," said NAR chief economist Lawrence Yun. "All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country."

The report showed notable decreases in existing home sales in the South, West, and Northeast, while existing home sales in the Midwest were unchanged.

NAR said the median existing home price in September was $258,100, down 2.8 percent from $265,600 in August but up 4.2 percent from $247,600 in September of 2017.

Total housing inventory at the end of September decreased to 1.88 million existing homes available for sale, reflecting 4.4 months of supply at the current sales pace.

The report also said single-family home sales fell by 3.4 percent to an annual rate of 4.58 million, while existing condominium and co-op sales also dropped by 3.4 percent to a rate of 570,000.

Next Wednesday, the Commerce Department is scheduled to release a separate report on new home sales in the month of September.


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China will allow the yuan to fall below $ 7 for the first time in 10 years

Trading 19 oct 2018 Commentaire »

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Under pressure, the Chinese yuan will drop below the psychologically important $ 7 a bit later this year or in 2019. This will provoke a further decline in the currency, which the US will not like and will cause a new wave of criticism from their side. The US Treasury said it would continue to "closely" monitor China's monetary policy, although it refrained from calling the Celestial Empire a "currency manipulator" in its semi-annual report presented on Wednesday.

On Thursday, the yuan fell due to sales in the local stock market, the rate dropped to $ 6.94, the lowest level since January 2017. Now, the markets are trying to predict whether the yuan will beat the mark of $ 7, to which it has not dropped the last 10 years.

Some analysts believe that Beijing is trying to prevent a too sharp drop in the yuan, since capital will begin to leave the country. Others say the Chinese authorities may allow the yuan to fall below $ 7.

"As a rule, this level is considered psychologically important, but now that the yuan is dropping from $ 6.3 to $ 6.9 and this does not cause a significant outflow of capital from China, we believe that the Bank of China is confident that they can cope with a further decline below $ 7 without a destabilizing effect," experts of Capital Economics comment on the situation.

In UBS, the decline in the yuan is associated with a slowdown in the economy. Emerging market strategists expect the exchange rate to fall to $ 7.10 over the next six months and reach $ 7.30 over the course of the year.

"In our opinion, there is no reason why the weakening of the yuan should stop at $ 7. This is a psychologically important level, but we believe that the Chinese currency will continue to decline," they explain.

On Friday, the yuan is still at its lowest level since January 2017.

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Earlier, experts wrote that the decline of the yuan from June is the result of the first round of trade disputes about tariffs between the United States and China. Another series of reductions could be expected if the 10% tariff, currently introduced by the United States for 200 billion imports of Chinese goods, will increase to 25%.

Here, Washington keeps the situation on the pencil, having planned this action for January. The subsequent decline of the yuan can already be described as a freely floating exchange rate. The decision to allow such a step "is not a response and is not a competitive devaluation," wrote analysts of the Institute of International Finance (IIF).

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USD / JPY: The yen loses trumps

Trading 19 oct 2018 Commentaire »

This week, the dollar-yen pair traded in the 100-point range, but in the end, it completes the five-day trading session almost at the opening positions. Despite the growth of core inflation in Japan, the yen remained under pressure from the US currency, jumping to the middle of the 112th figure. The external fundamental background is of primary importance for the pair, and the structure of Japanese inflation indicates a great influence of the oil market, the quotes of which have gone down again.

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In general, the yen is traditionally dependent on the degree of anti-risk sentiment in the market. Therefore, when one of the advisers to the American president this week accused China of ignoring US trade requirements, the Japanese currency "remembered" its status as a defensive asset and strengthened slightly against the dollar. In addition, the growth of the yen contributed to the negative dynamics in the stock markets of Asia, and China in particular. All this allowed the bears USD / JPY to test the 111th figure. Subsequent events have reduced interest in defensive instruments.

First, Beijing assured the public that it would support the national stock market, stopping sales in the stock market if necessary. Such a position calmed panic, and the yen, in turn, began to lose points.

Secondly, the data on the growth of the Chinese economy and the volume of industrial production published today suggest that the protracted trade war is beginning to affect the key macro indicators of the Middle Kingdom. In view of this circumstance, Beijing is again forced to devalue the national currency, thereby supporting exports and partly leveling the imposed duties. This tactic does not solve the root of the problem, but only reduces its consequences (and even partially), so the market again talked about that after the elections to the Congress, which will be held in less than a month. China and the US will sit down at the negotiating table. Such conclusions reduced anti-risk sentiment among traders and the demand for yen fell.

Without the support of an external fundamental background, the Japanese currency immediately loses its position, since it does not have its own arguments for growth. Extremely weak inflation in Japan leaves no hope for bears USD / JPY. The yen remains under the background pressure of the "pigeon" policy of the national Central Bank. Today's release of inflation data served as an extra confirmation of this. Despite the growth in the basic consumer price index (excluding volatile food prices), traders were cool about this fact, especially since the indicator was expected to grow to one percent.

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First, the pivotal level of inflation has overcome only half the way to the target two percent level. Secondly, the September CPI growth is explained by the increase in expenditures on petroleum products. In other words, inflation increased only due to "black gold". The cost of the rest of the group of goods increased slightly. It is worth noting that the barrel of the Brent brand fell today under the $ 80 mark, reflecting bearish sentiment. The emotional reaction to the scandal associated with the Saudi journalist subsided somewhat. According to analysts, Saudi Arabia will not use the oil market as a tool of influence in the conflict with the States. Also, the dynamics of quotations of "black gold" was influenced by data from the US. Oil reserves increased by 6.5 million barrels last week, these figures are more than two times higher than the forecasts of experts.

A set of fundamental factors lowered the cost of Brent under the key $ 80 mark. If this trend continues, Japanese inflation indicators may show a reverse trend, replacing weak growth with a gradual slowdown. Here, it is worth recalling that in July, the Bank of Japan expanded the range of the estimated size of the rate, thus admitting the likelihood of monetary policy easing. Therefore, a slowdown in inflation can hypothetically lead to a decrease in the interest rate further into the negative area. The head of the Japanese regulator, Haruhiko Kuroda, is a well-known supporter of the "pigeon" policy, so this scenario is not at all unlikely. At least in the course of his last speeches, he repeatedly pointed out the effectiveness of soft monetary policy. Therefore, in the next year and a half, the regulator can change its parameters except in the direction of easing.

Thus, the risk appetite renewed in the market, paired with the weak data on inflation in Japan, reduced interest in the yen, after which the USD / JPY rate went up again. This week, the situation is unlikely to change drastically (the pair will continue to be traded in the flat), so the main "fighting" for the pair will take place as early as Monday.

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Technically, a pair of USD / JPY needs to overcome the border of the 113th figure to confirm the development of the northern trend. If the price rises above 113.05, then the Ichimoku Kinko Hyo indicator will generate a rather powerful bullish signal Parade of lines that will "allow" the pair to grow up to the middle of 114th figure. A reliable level of support is the price of 111.50. At this price point, the upper limit of the Kumo cloud coincides with the lower line of the Bollinger Bands indicator on the daily chart.

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The US economy may slip into recession in the next two to three years – JPMorgan

Trading 19 oct 2018 Commentaire »

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Analysts at US investment bank JPMorgan Chase once again calculated the risk of a recession in the United States.

According to experts, the likelihood that in the next two to three years, the US economy could plunge into recession, exceeds 50%.

"According to our estimates, the risk of a recession, or an economic downturn in the United States, within one year is almost 28%, in the next two years, more than 60%, on the horizon of three years, more than 80%," representatives of the financial institution said.

JPMorgan Chase's calculations are based on a macroeconomic model, which, in particular, includes indicators such as consumer and business confidence, the demand for durable goods and the share of construction in the gross domestic product.

Meanwhile, experts from the Federal Reserve Bank (FRB) of New York estimate the likelihood of a recession in the coming year only at 14.5%.

In turn, the head of the Federal Reserve Bank of St. Louis, James Bullard believes that at present, the US economy does not need any stimulation or cooling.

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