Topsy-turvy trade in oil prices is pacing markets on Thursday, as black gold has rebounded a bit from a sharp fall on Wednesday. Investors went bargain hunting overnight after a very quick price drop yesterday on the news of an unexpectedly large buildup in U.S. gasoline stocks combined with a lukewarm outlook. The so-called commodity currencies were not able to sustain much momentum despite the mild turnaround in oil prices, with the Norwegian Krone the biggest loser today following a surprise 25 basis point cut by the Norges Bank. Norway’s central bank is the latest to join the ranks of central banks seeking easier policies, making last week’s “hold” decision by the Fed more glaring. The euro is finding a bit of support on better than expected business sentiment reports.
Global equities are in a bit of a churn at the moment, finding good news at a premium at the moment. Following a three day national holiday, Japan’s markets reopened up and quickly fell to a two week low. The Nikkei share fell as much as 2.8% on the recent news that Chinese and US factory output remains at depressed levels, the Japanese yen finding a bit of support as the resident safe haven asset in foreign exchange circles. Germany’s Ifo Institute reported on Thursday that business sentiment unexpectedly rose in September. The euro is finding a bit of support today, as VW shares have rebounded more than 8% on the news that CEO Martin Winterkorn has resigned amid the emissions scandal that has roiled markets. A bit of interesting news as it was reported EU banks only bid €15.5 billion on the most recent targeted LTRO. LTRO’s provide long term refinancing by the European Central Bank to the financial sector by offering cheaper liquidity to banks, which should be lent to the real economy. This small take-up by banks is much lower than June’s €73.8 billion.
We have a heavier slate here in the US this morning, as weekly jobless claims and August durable goods orders will be released at 830am. The market is expecting another strong result from jobless claims, as fewer than 300k Americans have filed first time unemployment claims for many months in a row. This week, it is expected that only 269k Americans filed first time claims, keeping this important number at multi-year lows. The ever volatile durables goods will also be unveiled and analysts are anticipating a bit of a slide after the strong +2.0% rise in July. Some view the durable goods numbers as a strong indicator on the general health of the US economy, but with the volatility of this number, reactions should be muted this morning save for a big miss on what is likely. The US dollar gave back a bit of this week’s gains after US factory activity slumped to a two-year low, according to Markit’s PMI result. The greenback remains tilted higher though, one week after the FOMC held rates at record low rates. Chairman Yellen will address markets at 5pm EST, speaking at a conference in Amherst, Massachusetts.
The Canadian dollar touched a new yearly low on Wednesday following disappointing figures from the Canadian Retail Sales during the month of August. Oil prices fell nearly 3% as well on Wednesdayafternoon, which weighed on the Loonie as well. The more bullish impact of lower crude inventories was more or less offset by large gasoline builds, raising concerns about high current fuel supplies. By New York’s close, oil prices hovered just below $45 per barrel and today’s rebound has yet to support the Canadian dollar. Looking ahead to next week, there is a bit more domestic news to dissect. Producer prices and July GDP get things going before manufacturing PMI on Thursday and August trade balance finish a week of second tier data. The Canadian dollar remains a sell on rallies, taking its cue from developments in the broad market.
Further reading:
USD Index on Temporary Retreat-Elliott Wave Analysis
EUR/USD: Revising The Downside – Barclays
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