In order to stimulate the economy, the People’s Bank of China (PBoC), effective on April 20, lowered the RRR by -100 bps for all the banks, and an additional -100 bps for some rural financial institutions and -200 bps for the Agricultural Development Bank of China. The RRR for rural cooperative banks will also be lowered to rural credit cooperatives’ level.
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China Cut RRR by -100 bps, Biggest Size Since 2008
Commodities rose as the post-FOMC selloff in the US dollar continued. Disappointing economic data also trimmed speculations of Fed’s tightening. The front-month contract for WTI crude oil strengthened for a second consecutive day, rising to a 2-week high of 47.61 before settling at 47.45, up +3.7%. The Brent crude contract also gained +1.08% at close.
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Continued Selloff of Greenback Supports Crude Prices
Crude oil prices moved modestly higher in Asian session, ahead of a busy week. Indeed, we expect range-bound to continue as the heavy-loaded economic release and central bank meetings should lead the commodity to trade in no direction. China released the official PMI data over the weekend. The May reading rose to 50.8, compared with 50.4 in April and market expectation of 50.7.
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Crude Modestly Higher, Awaiting Heavy Economic Calendar
Gold remains under pressure in European session, with the benchmark contract struggling below US$ 1300 amid expectations that the Fed would trim asset purchases further in April. Meanwhile, the yellow metal weakened as physical demand from China appeared to have slowed in March. While China does not publish its official data, related information might be accessed through the trade data of Hong Kong.
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Gold Struggles Below 1300 as Further Fed’s Tapering Remains on Track
The euro ended the week higher against the US dollar and other major currencies following the ECB’s (European Central Bank) decision on Thursday to hold interest rates in the euro zone at 0.25 percent spooking investors, with the euro up 0.5 percent at $1.36 against the greenback.
Latest Euro Exchange Rates
The euro currently exchanges $1.36330 US dollars, against UK Sterling the euro is at £0.83070.
Euro zone Inflation v Deflation
An unexpected dip in inflation to 0.7 percent last month had bolstered calls for more easing ahead of the ECB meeting on Thursday. Those calls were ignored by the euro zones rate setters on, none of whom tabled an interest rate cut or measures to add liquidity to counter the recent rise in money market rates.
Though ECB president Mario Draghi’s acknowledged that inflation had been “lower than generally expected last month”, he stressed that prices continued to rise. “Is there deflation? The answer is no. There is certainly going to be subdued inflation, low inflation for an extended, protracted period of time, but no deflation.”
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Euro jumps higher against the US dollar as ECB holds interest rates
Asian shares weakened today as Chinese IP data came in worse than expected. Wall Street on Monday had a choppy session yesterday. While climbing higher earlier in the day amid the optimism of last Friday’s employment data, gains were pared as European data disappointed. Reactions after Fed officials’ speeches were rather muted.
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Asian Shares Pressured as Chinese IP Disappointed
The US markets moved modestly higher as housing data impressed. The US dollar fell as consumer confidence unexpectedly dropped and bond yields fell. The euro firmed as policymakers’ comments on the ECB’s monetary outlook were a mix of hawks and doves.
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Encouraging US Data Lifted Sentiment ahead of thanksgiving
Crude oil prices tumbled on Friday amid rising stockpiles in the US and report showing higher-than-expected Libya production. The front-month contract for WTI crude oil slumped to as low as 94.36, a level not seen since June, before settling at 94.61. The contract fell -1.84% and -3.31% on daily and monthly basis respectively. Brent crude dived to a 3-month low of 105.78 before ending the day at 105.91, down -2.69% and -0.95% respectively.
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Weekly Fundamentals – Crude Oil Prices to Soften in 4Q13
Ongoing protests in Libya have disrupted oil production in the region, sending Brent crude prices to the highest level in 3 days (up +2.51% d/d) and widening its spread with WTI crude which climbed +0.85% during the day. Gold price steadied. Market sentiment picked up despite weakness in US economic data.
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Crude Oil Soared as Protests in Libya Crippled Production
With the US lawmakers reaching a deal to re-open the government through January 15, 2014 and increase the debt limit to February 7, the political drama has come to an end, for now. Note also that, this time, the Treasury was specially allowed to continue issuing debt for several months even if the US runs up against the debt ceiling again in 5 months time.
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Weekly Fundamentals – US Political Drama Ends Temporarily