Financial markets climbed higher with encouraging US jobless claims data. Wall Street gained with the DJIA and the S&P 500 indices rising +0.17% and +0.40% respectively. In the commodity sector, crude oil prices firmed as driven by the stock markets. The front-month contract for WTI crude oil jumped +2.42% to finished the day at 93.64 while the Brent crude contract soared +1.65% to settle at 103.41.
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Markets Buoyed by US Job Data, Geopolitical Tensions in Syria
The value of the eurozone’s shared currency, the euro now seems overvalued to investors looking to park cash in Europe these days and the euro’s value may tank lower if the ECB decide to cut interest rates at their next meeting in May.
More Monetary Stimulus?
The eurozone’s recovery efforts this year have so far done little to jumpstart the sputtering economy and many are now calling for more monetary stimulus, which could be achieved through lowering interest rates, whilst lowering the value of the currency which could help with European exports.
Euro to USD
The euro is overvalued against the US dollar, according to Russian billionaire Oleg Deripaska, and the single currency’s continuing high value is stifling growth and putting off investment in the eurozone. Mr Deripaska, who controls Rusal, the world’s largest aluminium producer, said the turmoil in the currency union and high value of the euro meant his business would be steering clear of investing in Europe.
In 2002, the euro traded at 90 US cents but jumped to a peak of $1.59 in July 2008. It has since fallen to around $1.31, but Mr. Deripaska believes that is still too high.
“I can’t understand why the euro is so high,” he told the Daily Telegraph in an interview, “Has Europe become more productive or created more innovation? I just can’t see it.”
Draghi Clues – Competitiveness
European Central Bank President Mario Draghi said last week that monetary policy can’t address the root causes of the sovereign debt crisis and it’s up to governments to enact structural reforms.
“Problems in the euro-area economic landscape still loom large” and “the way out is to restore competitiveness,” Draghi said in a speech in Amsterdam on Monday 15th April.
So competitiveness could arrive in the form of a lower value in the euro and one of the best ways to acheive this would be to cut the current interest rate in the euro area from 0.75 percent to 0.5 percent or lower. But the question is, will they act or is it all just talk?
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Euro exchange rate now seems overvalued and may tank lower
European Brent oil prices have broken back through $100 a barrel in trading on Monday and continues to hold this morning as many traders and invsetors are left guessing the future direction of commodity prices for the short to medium term.
Latest Brent Oil Price
In London, Brent crude oil futures for June 2013 was trading at $100.50 a barrel, 07:43 GMT this morning on the ICE Futures Exchange.
This month’s 10 percent slide in Brent crude has taken investors by surprise and many are leaving the market. The number of Brent futures contracts held by investors is down 8 percent from a record 1.58 million contracts on 8th March.
Oil Prices Settling Out?
“The oil market is just trying to settle out, and to see whether the corrective action we saw late last week and this morning is going to continue. The question is whether this downtrend we’ve been in since the first of April is going to break or brake.” said Andy Lebow, senior vice president for energy at Jefferies Bache, New York.
“We’re seeing a bit of bargain hunting that is keeping prices up,” according to Ric Spooner, chief market analyst at CMC Markets in Sydney.
Crude oil prices had last week slid further lower, with Brent falling to a nine month low before recovering on market speculation that the OPEC plans to cut output.
Eurozone Crisis
The price of Brent crude takes cues from a variety of markers, with the value of the US dollar and oil output and demand factors being the main driving forces. However with several eurozone countries in economic crisis, prices for commodities are becoming harder to guess real value or future direction.
Earlier this month the IEA (International Energy Agency) cut its global oil demand forecast for 2013, reducing its estimate for global oil consumption by 45,000 barrels a day to 795,000 barrels a day, citing weakening demand in Europe.
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Brent oil price breaks back through $100 as many left guessing future direction
Scamble for cover, there could be euro money transfer mayhem next week when Cypriot banks finally reopen, which would be next Tuesday at the very earliest as the Cyprus government has ordered banks to stay closed, whilst the Cypriot stock exchange remains in suspended trading as well.
Meanwhile, Cyprus is considering some form of capital control to prevent a run on their banks when they finally reopen.
Russia to the Rescue?
In Moscow, the Cypriot Finance Minister Sarris is discussing possible Russian investments in the island’s banks and energy resources to reduce its massive debt burden, as well as an extension to an existing 2.5 billion euro Russian loan. Russian citizens have billions of euros to lose if the outcome doesn’t go their way.
It’s interesting to note that Russia could do very well out of this situation, which was after all created with full approval of the EU and the IMF. Either way, the situation is going to lead to mass withdrawls of capital as some investors will be in no doubt that their money is now in an unsafe place.
Russian’s are the biggest investors for Cypriot banks, with the UK being the second largest investors.
On Wednesday, Ivan Tchakarov, chief economist at Renaissance Capital, told reporters that Russia, which was enraged by the unexpected European deal, could step in to save Cyprus from total financial collapse.
“This situation presents a fantastic opportunity for Russia and even President Putin to take moral high ground and to extend another loan to Cyprus and to become a savior of Europe,” he told reporters in Moscow.
How to Transfer Money the Smart Way
For those who are considering a cross currency, bank to bank international money transfer and if you want to save money, then beat the banks (including the banks in Cyprus) choose Currencies Direct to transfer your funds overseas.
If you have been affected by the latest events surrounding Cyprus, if you need to make an urgent money transfer then check out Currencies Direct website click here
Foreign exchange brokers like Currencies Direct are able to make bank to bank money transfers on behalf of their clients and more often than not they will be much more competitive than high street banks. So to move money the smart way, open a free account and wait until the banks reopen next week to mull over your options. Because the ECB has just upped the game again:
ECB Could Pull the Plug on Cypriot Banks
The ECB (European Central Bank) confirmed this morning that it would suspend the provision of emergency liquidity to Cypriot banks next Monday if Nicosia did not have a bailout plan agreed with the EU and IMF (International Monetary Fund) by that time. The country’s two biggest banks are believed to be reliant financial assistance provided by the Central Bank of Cyprus.
So what does this mean? Well, it means to me that the handling of the matter of Cyprus started very badly, and now looks like once again, the EU are putting pressure on the Cypriot government to bow to their demands, something that has no backing by any political party in Cyprus, nor the backing of individuals, or investors.
It remains to be seen what the outcome of this will be, but for now it looks like the euro is back under selling pressure.
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Euro money transfer mayhem a possibility when Cyprus banks finally reopen
Asian shares rebounded Tuesday after the decline a day earlier. While concerns remained about the Cyprus bailout plan, sentiment improved moderately as the Eurogroup decided to increase the flexibility on bank levy conditions. The MSCI Asia Pacific Index climbed modestly, following the -1.87% decline yesterday, in the morning session.
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Asian Shares Rebounded on Amendment of Cyprus’ Level Proposal
Sentiment improved modestly as a more optimistic Germany’s ZEW data was partly offset by weakness in US housing data. Japanese yen firmed mildly as investors took note of Financial Minister Aso’s comments that the central bank is not intended to purchase foreign bonds to weaken the currency and ECB’s/BUBA’s Weidmann said that the G-20 sent a clear signal to oppose currency manipulation.
Originally posted here:
German Confidence Data Boosted Sentiment
Commodities retreated in US morning as investors took profits after yesterday’s rally. Eurozone data released during the data disappointed with Germany’s retail sales slipping -1.7% m/m in December, following a downwardly revised +0.6% a month ago. The job market, however, showed modest improvement in January with the number of unemployment reducing -16K, following a -2K drop in December.
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Commodities Retreated on Profit-Taking
Commodities made modest gains last week amid a few optimistic headline, mainly related to Europe and China. The Basel Committee of banking supervisors announced to delay the time that global banks should acquire designated liquid capitals to weather future crisis by 4 years to 2019.
Continued here:
Weekly Fundamentals – Brent to Continue Rising Modestly in 2013
The October FOMC minutes unveiled that policymakers discussed several issues at the meeting, including replacing the calendar language to data threshold in future guidance and implementing additional asset purchases after the expiration of Operation Twist in December.
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Further Fed Easing Not Ruled Out
Financial markets in Asia moved modestly lower on Monday, carrying forward last Friday’s selloff in the US session. The US earnings season sent mixed signals to the market. Of the 117 US companies that have reported earnings for the third quarter, banks and consumer-related stocks sent pleasant surprises while technology, energy and mining sectors were rather disappointing in terms of sales revenue and earnings.
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Japan’s Trade Deficit Widened the Most on Record, BOJ Pledged to Keep Ultra Low Interest Rates