Dollar Turns Subdued After Trump Declares National Emergency

Trading 15 fév 2019 Commentaire »

After holding in positive territory during earlier part of the session on Friday, the U.S. dollar retreated and lost ground against some peers after President Donald Trump declared a national emergency on border security.

Earlier, Trump signed a bill to avoid another government shutdown.

Economic data turned out to be a mixed bag. Import prices contracted in January and industrial production declined in the month. However, there was something to cheer about for investors as data from the University of Michigan showed consumer sentiment to have climbed to a score of 95.5 in February, topping forecasts.

The dollar index dropped to a low of 96.83 by mid afternoon, after having risen to a high of 97.37 early on in the session.

On the trade talks front, the two-day high level discussions ended in Beijing today with no progress on certain key issues. Chinese President Xi Jinping said after the conclusion of the two-day discussions that talks will resume in Washington next week.

The dollar strenthened to 1.1234 against the Euro, gaining significantly from previous close of 1.1298, but retreated later and weakened to 1.1312.

Comments from European Central Bank that banks may get some long-term refinancing sent stock prices, especially those from the banking space, soaring in European markets.

The greenback exhibited weakness against the Pound Sterling, with the latter rising to $1.2897, up from previous close of $1.2802.

Against the Yen, the dollar strengthened to 110.65 yen from previous close of 110.47, but eased to 110.41 subsequently, netting a loss of about 0.05%.

Against Swiss currency, the dollar reached a high of CHF 1.0090, but eased to CHF 1.0045 later on in the session, losing about 0.05%.

President Donald Trump today declared the situation on the U.S. border with Mexico a national emergency in order to secure additional funding for his divisive border wall.

Trump announced the controversial move in a speech from the White House Rose Garden after both the House and Senate approved legislation to avoid another government shutdown.

The spending bill provides significant money for border security, including nearly $1.4 billion for physical barriers, but falls well short of the $5.7 billion Trump has demanded for construction of the wall.

During his speech, Trump reiterated the justifications for the border wall that he offered throughout his presidential campaign and his two years in the White House.


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Treasuries Pull Back Slightly Amid Optimism About Trade Talks

Trading 15 fév 2019 Commentaire »

After moving notably higher over the course of the previous session, treasuries gave back some ground during trading on Friday.

Bond prices climbed well off their worst levels but still ended the day slightly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by nearly a basis point to 2.666 percent.

The pullback by treasuries came as safe havens such as bonds lost their appeal amid continued optimism about trade talks between the U.S. and China, the world's two largest economies.

A statement from the White House said high level U.S.-China trade talks this week led to "progress between the two parties" but noted "much work remains."

The White House said the U.S. hopes to see additional progress as discussions at the ministerial and vice-ministerial levels continue in Washington next week.

Optimism about the economic outlook was also generated by preliminary data from the University of Michigan showing a bigger than expected rebound in consumer sentiment in the month of February.

The report said the consumer sentiment index climbed to 95.5 in February after tumbling to 91.2 in January. Economists had expected the index to rise to 93.0.

Surveys of Consumers chief economist Richard Curtin said the rebound in consumer sentiment reflected the end of the partial government shutdown as well as a more fundamental shift in consumer expectations due to the Federal Reserve's pause in raising interest rates.

Meanwhile, traders largely shrugged off a report from the Federal Reserve showing an unexpected decrease in industrial production in January.

The Fed said industrial production fell by 0.6 percent in January after inching up by a downwardly revised 0.1 percent in December.

Economists had expected production to tick up by 0.1 percent compared to the 0.3 percent increase originally reported for the previous month.

The unexpected drop in industrial production came as manufacturing output slumped by 0.9 percent in January after climbing by 0.8 percent in December.

Following the holiday weekend, next week's trading may be impacted by reaction to reports on homebuilder confidence, durable goods orders and existing home sales.


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Crude Oil Futures Settle At Near 3-month High

Trading 15 fév 2019 Commentaire »

Crude oil futures ended sharply higher on Friday, lifted by recent data showing declines in crude output from OPEC. Traders also felt that Saudi Arabia's decision to increase the level of output reduction will significantly tighten crude supply in the market.

Expectations that the U.S.-China trade talks that will continue in Washington next week will help resolve the disputes between the two largest economies in the world and allay fears about energy demand pushed up oil prices.

West Texas Intermediate Crude oil futures for March ended up $1.18, or 2.2%, at $55.59 a barrel, a near 3-month high.

On Thursday, crude oil prices ended up $0.51, or about 1%, at $54.41 a barrel.

For the week, crude oil futures gained as much as 5.4%.

In January, OPEC cut output by nearly 800,000 barrels per day, just short of the proposed reduction of 812,000 barrels per day.

Earlier this week, Saudi Arabia said that it plans to produce around 9.8 million barrels per day of oil in March, more than half a million barrels per day below its pledged production level.

The partial closure of Safaniya offshore oil fields in Saudi Arabia too contributed to oil's uptick today.

Baker Hughes reported today that U.S. oil firms increased the number of oil rigs by three this week, bringing the total rig count to 857.

In its monthly report this week, the International Energy Agency warned that the global oil market will struggle to absorb fast-growing crude supply from outside the Organization of the Petroleum Exporting Countries.


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Gold Futures Settle Notably Higher

Trading 15 fév 2019 Commentaire »

Gold prices rose to a two-week high on Friday with traders creating fresh positions amid optimism about U.S.-China trade talks.

A positive outcome from U.S.-China trade negotiations will significantly boost gold demand in China, the biggest market for the commodity.

After the conclusion of the two-day high level talks between U.S. and China officials in Beijing, Chinese President Xi-Jinping said today that talks will continue in Washington next week, raising hopes the two nations will agree on a deal sometime soon.

Gold prices advanced today, despite dollar's rise and gains for European and U.S. stocks.

The Dollar Index rose to a high of 97.20 before retreating to lower levels after data showed import prices to have weakened for the third straight month in January.

Gold futures for April ended up $8.20, or 0.6%, at $1,322.10 an ounce.

On Thursday, gold futures for April ended down $1.20, or 0.1%, at $1,313.90 an ounce. For the week, gold futures gained 0.3%.

Silver futures for March settled at $15.743, gaining $0.215 for the session.

Copper futures for March ended up $0.0245, at $2.7985 per pound.

Preliminary data from the University of Michigan showed a bigger than expected rebound in consumer sentiment in the month of February.

The report said the consumer sentiment index climbed to 95.5 in February after tumbling to 91.2 in January. Economists had expected the index to rise to 93.0. Consumer sentiment saw a notable deterioration in January.

A report from the Federal Reserve said industrial production in the U.S. unexpectedly decreased in the month of January, falling by 0.6% after inching up by a downwardly revised 0.1% in December.

Economists had expected production to tick up by 0.1% compared to the 0.3% increase originally reported for the previous month.

The unexpected drop in industrial production came as manufacturing output slumped by 0.9% in January after climbing by 0.8% in December.


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EUR / USD: Should I be afraid of the parliamentary elections in Spain?

Trading 15 fév 2019 Commentaire »

The euro/dollar pair has once again demonstrated a southern impulse. However, yesterday's correction did not continue as the bears returned the price to the area of the 12th figure. Such price dynamics are fully justified because the single currency is now under pressure not only from the economic problems of the eurozone but also from political uncertainty in Spain.

However, Spanish politicians are the only ones that make traders nervous. In France, the protests of the "yellow vests" do not subside and in Italy, the trade unions recently protested, where representatives of the association of industrialists joined them. Experts warn that such sentiments on the eve of the elections to the European Parliament, which will be held in three months, are a wake-up signal to the markets. The popularity of populist and nationalist political forces is growing in the EU countries, so the results of the general European elections may unpleasantly surprise.

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According to preliminary forecasts, there will be more groups in the European Parliament, while representatives of large factions will not be able to repeat their previous results. This is fraught with the fact that the European Parliament will be fragmented, and coalitions will be created with great difficulty. In addition, according to a number of political scientists, Eurosceptics will block many initiatives, primarily in the sphere of migration legislation.

In this context, the latest German local elections look significant, which were held last fall. The results of the plebiscite showed that electoral preferences are changing in Germany and these changes are not in favor of European integration. The main sensation of the last election was the incredible success of the ultra-right. For four years, they strengthened their positions tenfold and were able to get into parliament, reflecting the prevailing attitudes in society.

In other words, factors such as the popularization of ultra-right political forces, the intensification of anti-immigration rhetoric and the increasing role of nationalist ideas weigh on the prospects for the development of the European Union. Similar trends can be reflected in the outcome of the pan-European elections. This fact puts pressure on the single currency, especially against the background of a slowdown in the key indicators of the eurozone and softening the rhetoric of the ECB.

Yet, Spain has become the catalyst for today's price decline of EUR/USD pair. There will be extraordinary parliamentary elections again for the third time in a row over the past four years. The deputies could not find a compromise on the proposed budget, forcing the prime minister to announce early elections. Thus, on April 28, the Spaniards will not only appreciate the work of the socialist government but also change the political format of the parliament - at least, many local experts are sure of it.

It should be noted here that the events in Spain should not be viewed only in a negative context. Despite the fact that any extraordinary elections are certainly stressful for the markets, their results can positively affect the single currency. The fact is that literally the other day there was a mass protest in Madrid, which was attended by tens of thousands of local residents. They protested against the country's Social Democratic Prime Minister Pedro Sanchez, who in their opinion, behaves "too liberally" in relation to the Catalan government and supporters of the separation of the region from Spain. In other words, the protesters spoke in favor of the unity of the country, expressing protest to the current government and parliament (until March 5), if pro-European political forces come to power (in particular, representatives of the Citizens Party) following the spring elections.

Despite such possible prospects, the market reacted negatively to today's events in Spain. Traders are focused on current events while long-term projections have little effect on the dynamics of the EUR/USD pair. Investors are concerned about the growing political uncertainty in the eurozone countries, as well as, the slowdown of the EU economy and vague prospects for Brexit.

In addition, the likelihood of a resumption of the trade war between the United States and China has increased again despite the ongoing negotiation process. According to Chinese leader Xi Jinping, trade negotiations will be resumed with their next round to be held next week in Washington. Representatives of the negotiating group avoid any specifics in their comments. The essence of their statements comes down to the fact that they have made some progress, although there is still a lot of work to be done. Such veiled statements alarm traders, given the fact that the "deadline" on March 1 is just around the corner.

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Thus, the single currency is still not strong enough to recover. In such circumstances, any more or less large-scale correctional growth of EUR/USD pair should be considered as an occasion to open short positions. The nearest southern target is 1.1230, which is the bottom line of the Bollinger Bands indicator on the daily and weekly charts. If the bears consolidate below this support level, they will open the way to the level of 1,1100, which is the bottom line of the Bollinger Bands but on the monthly chart.

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U.S. Consumer Sentiment Rebounds More Than Expected In February

Trading 15 fév 2019 Commentaire »

After reporting a notable deterioration in U.S. consumer sentiment in the previous month, the University of Michigan released preliminary data on Friday showing a bigger than expected rebound in sentiment in the month of February.

The report said the consumer sentiment index climbed to 95.5 in February after tumbling to 91.2 in January. Economists had expected the index to rise to 93.0.

Surveys of Consumers chief economist Richard Curtin said the rebound in consumer sentiment reflected the end of the partial government shutdown as well as a more fundamental shift in consumer expectations due to the Federal Reserve's pause in raising interest rates.

Consumers expressed significantly more optimism about the economic outlook, with the index of consumer expectations jumping to 86.2 in February after plunging to 79.9 in January.

The current economic conditions index showed a more modest increase, inching up to 110.0 in February after slumping to 108.8 in January.

On the inflation front, one-year inflation expectations dropped to 2.5 percent in February from 2.7 percent in January and five-year inflation expectations slid to 2.3 percent from 2.6 percent.

"The data suggest that the Fed will find it even harder to justify another rate hike given the record low inflation expectations," Curtin said.

He added, "The data will also add to the debate about the evolving relationship between unemployment and inflation as consumers now anticipate lower inflation and higher unemployment."


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*U.S. Consumer Sentiment Index Climbs To 95.5 In February

Trading 15 fév 2019 Commentaire »

U.S. Consumer Sentiment Index Climbs To 95.5 In February


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Euro flies into the abyss

Trading 15 fév 2019 Commentaire »

The disappointing statistics on US retail sales for December only temporarily stopped the bears in EUR / USD. The US economy slows down to 2% in the fourth quarter, according to JP Morgan. The Fed does not begin to raise the federal funds rate in 2019, as the derivatives market shows, but the eurozone looks so gloomy that it's fit to talk about reanimation QE. Against this background, the fall of the euro to 3-month lows against the US dollar looks logical. The main thing is that sellers do not overdo it.

In the fourth quarter, German GDP almost fell into a technical recession, while European GDP grew by a modest 0.2% q / q. The problems of German industry, weak domestic and external demand are forcing the economy of the currency bloc to slow down. Many of the difficulties are most likely temporary. If the trade wars stop, then the export of the Old World will be able to rise from its knees, but who can guarantee that this will happen? That having dealt with China, Donald Trump will not take up the EU by increasing duties on European cars? But there is also Brexit and the related gap in economic ties with an important trading partner. Italy with its eurosceptics. The euro looks so weak that it is unable to resist even the deprived of the main trumps of the US dollar.

The "American" no longer expects aggressive monetary restriction and 3% GDP growth. About half of the hundreds of Reuters experts predict that the Fed has completed a cycle of tightening monetary policy, the rest believe that the central bank will raise the rate only once. Derivatives market gives only 2% probability of such an outcome. For comparison, the chances of lowering the rate are estimated at 12.5%. At the same time, statistics on the States, with the exception, perhaps, of retail sales, does not disappoint at all, and the divergence in the dynamics of economic surprise indexes creates a solid foundation for the downward trend in EUR / USD.

Dynamics of US economic indexes and eurozone surprises

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Obviously, against the background of decent data, the fall in the probability of the Fed normalization cycle continuing is entirely connected with the "pigeon" rhetoric of its representatives. In this regard, the publication of the minutes of the January meeting of the FOMC seems to be a test for the US dollar. However, the euro will have to go through the fire and copper pipes: a day later, on February 21, the statistics on business activity and the minutes of the meeting of the Governing Council will be released. I recall that during the press conference on its results, Mario Draghi spoke about the LTRO, which was the reason for the sales of the euro.

Equally important are the results of trade negotiations between the United States and China. Should the conflict escalate, capital flight to safe havens will accelerate the fall of EUR / USD. Only the presence of a breakthrough will allow the bulls to go to the counter.

Technically, bears on the main currency pair are making titanic efforts to bring quotes outside the trading range of 1.1265-1.1485. If they succeed, the risks of target realization by 127.2% on the "Butterfly" pattern will increase.

EUR / USD, the daily chart

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U.S. Industrial Production Unexpectedly Drops 0.6% In January

Trading 15 fév 2019 Commentaire »

Industrial production in the U.S. unexpectedly decreased in the month of January, the Federal Reserve revealed in a report released on Friday.

The Fed said industrial production fell by 0.6 percent in January after inching up by a downwardly revised 0.1 percent in December.

Economists had expected production to tick up by 0.1 percent compared to the 0.3 percent increase originally reported for the previous month.

The unexpected drop in industrial production came as manufacturing output slumped by 0.9 percent in January after climbing by 0.8 percent in December.

The pullback in manufacturing output primarily reflected a large drop in production of motor vehicle assemblies, although factory output still dipped by 0.2 percent excluding motor vehicles and parts.

Meanwhile, the report said utilities output rose by 0.4 percent in January after plummeting by 6.9 percent in December.

Mining output also inched up by 0.1 percent in January following a 1.5 percent jump in the previous month.

The Fed also said capacity utilization for the industrial sector fell to 78.2 percent in January from an upwardly revised 78.8 percent in December.

Economists had expected capacity utilization to come in unchanged compared to the 78.7 percent originally reported for the previous month.

Capacity utilization in the manufacturing and mining sectors fell to 75.8 percent and 94.8 percent, respectively, while capacity utilization in the utilities sector edged up to 75.4 percent.


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Growth In New York Manufacturing Rebounds More Than Expected In February

Trading 15 fév 2019 Commentaire »

A report released by the Federal Reserve Bank of New York on Friday showed a notable rebound in the pace of growth in regional manufacturing activity in the month of February.

The New York Fed said its general business conditions index climbed to 8.8 in February from 3.9 in January, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to rise to 7.0.

The bigger than expected increase by the index came after it tumbled to its lowest level in well over a year in the previous month.

The rebound by the headline index was partly due to faster new orders growth, as the new orders index rose to 7.5 in February from 3.5 in January.

On the other hand, the report said the shipments index slumped to 10.4 in February from 17.9 in the previous month.

The number of employees index also fell to 4.1 in February from 7.4 in January, indicating a slowdown in the pace of job growth.

The prices paid index also tumbled to 27.1 in February from 35.9 in January, although the prices received index jumped to 22.9 from 13.1.

Looking ahead, the New York Fed said firms were more optimistic about the six-month outlook, with the index for future business conditions surging up to 32.3 in February from 17.8 in January.

The Philadelphia Federal Reserve is scheduled to release a separate report on regional manufacturing activity next Thursday.


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