Thursday, February 18: 5 Things the markets speak of
Despite a shortened holiday trading week, investors face many moving parts - OPEC / Iran, EM central banks, discussions / EU Brexit - to stay ahead. Market volatility is here to stay for a while, even the OECD and the World Bank are concerned.
1. Chance for oil production deal of training contracts
Hopes for OPEC / non-OPEC trading crude production continues to drive global equities more. Oil prices are still on the upside, that Iranian officials seem to have given a "wink" to efforts to stabilize the market. Post-close API inventories in U.S. yesterday also showed a surprising draw. Even US Treasuries were sold (+ 10 save 5bps to + 1.84%. They now + 20bps higher since the last record of the week low yields).
had barely Saudi Arabia, Russia, Qatar and Venezuela penned an interim agreement to freeze oil production Tuesday, the ministers of OPEC Qatar and Venezuela went to Tehran convince the Iranians to go along with the deal.
After the meeting, the Iranian oil minister said his government "supports all efforts" to stabilize the oil market and prices, and supports cooperation between OPEC and non-OPEC, but would "wait and see" what impact the meetings between OPEC and non-OPEC member countries on oil prices before formally joining any agreement. This was music to the ears crude bulls - but for how long
For the currencies of commodities such as CAD, it is once again hanging on the oil wagon yet ?. The Canadian dollar surged yesterday as the dollar shred more than -1% (C $ 1.3670) than WTI ($ 31.27) found an offer. dollar bulls continue to scratch their heads regarding CAD - except M & A, no oil, not evaluate its differences was a lottery when drawing Executive loonie up this year.
2. The biggest bang for their peso
After leaving rates unchanged at their fourth meeting in February, the Bank Central Mexico (Banxico) has taken the market by surprise with the announcement yesterday. One day after the holding of a special meeting (Tuesday) Banxico noted in day rates by + 50bps on the day to + 3.75% compared with + 3.25%. It was reported that Banxico sold USD as late as Wednesday morning.
The MXN weakness had increased the potential knock on effects of inflation. The peso has since rallied 4% outright the rise of surprise. Mexico central bank has always preferred "rules-based" intervention so that the movement of yesterday certainly caught many by surprise. Later that morning, Banxico will publish the minutes of their meeting there two weeks. Oil and China remain the main engines; do not be surprised that the rise yesterday, coupled with budget cuts could curb the growth of Mexico.
Banxico should only sell USD directly on the foreign exchange market in "truly exceptional conditions." The direct intervention only comes about because the central bank and the Finance Minister consider that the exchange rate to be out of line with the macroeconomic framework of the country.
What Mexico arsenal deployed yesterday should somewhat reduce incentives for speculators against MXN position.
other Latin American countries take another path towards economic stability. in Brazil, stocks rallied hard after a central banker (Banco central Do Brasil) he hinted that their next move could very well be a decline in the benchmark SELIC rate. However, earnings have been halved when S & P cut the sovereign rating further into junk territory to BB from BB +;. negative outlook
in Venezuela, President Maduro has devalued rate Official exchange for priority products -37% to 10 VEF / USD 6.3, from today.
3. is strange for an increase from December Fed rate hike
The mighty dollar is certainly benefiting from little love rate differential. US data of industrial production on Wednesday (Jan. PPI inflation readings checked from Dec. weak showing Headline PPI was up 0.1% after falling 0.2% a month earlier, while the measure y / y was up 0.2% compared to -. 1.0%) suggests that US growth is still somewhat resilient.
Fed funds futures (a proxy for the policy of the central bank) indicate that there is now a risk of a 43% rate hike by the Fed at its policy meeting in December. The likelihood of an increase of the Fed was on horseback + 12% earlier this week shortened trading, while earlier this month, chances stagnated.
The last set of minutes of the Fed meeting released yesterday, stressed predictable increasingly concerned about the impact of global volatility on the economy and inflation US Most members consider now that volatility has increased. A Fed-dependent data is hard to read, expect increased volatility in markets around every FOMC meeting this year.
4. OECD Cuts 2016 2017 global growth forecast
OECD cuts euro zone 2016 GDP growth forecast of + 1.8% to + 1, 4% and reduced its 2016 forecast for global growth in GDP of + 3.3% to + 3.0% this morning. The organization said that the economies of Brazil, Germany and the United States slow and predictable warned that some emerging markets (EM) are at risk of volatility in exchange rates.
"risks to financial stability are important," the Paris-based organization said. "Some emerging markets are particularly vulnerable to sharp fluctuations in exchange rates and the effects of high domestic debt."
In its most powerful call to action since the financial crisis, the OECD said the global economy is suffering from weak demand which can not be corrected by the stimulus only central banks.
With low global interest rates, governments should practice what they preached -. Borrow more and put the capital at work
5. Brexit talks begin
European leaders begin a two-day summit today, seeking to keep the UK in EMU -. there is no guarantee of an agreement
Investors should wait for the UK pending referendum on whether to remain member of the EU to weigh on financial markets of the country for coming months. Many are assuming the U.K. will vote to stay in the EU; However, there is now a chance of a Brexit 40%. Any kind of separation would affect the long-term market.
Because of the uncertainty, the demand for doping for contracts that protect investors from a big move in GBP this summer. Dealers noted that the cost of certain options hit its most extreme levels since the debt crisis of Europe. Implied volatility (of vol.) Has rallied 12% this week cost compared to 8.4% recorded it two months ago.
The GBP (£ 1.4323) is stable as EU leaders enter the summit "make-or-break" on the face of difficult compromises to keep Britain in the block and quarrels with the worst crisis of migrants in Europe since World War II. To avoid so-called "Brexit" Cameron has four key requirements -. Restrictions wellness to help curb immigration, guarantees of non-euro Britain, increasing the competitiveness of the EU and an opt-out of further integration of the EU
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Read More: FX5: Banxico – Biggest bang for their peso (MXN)
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