The big news overnight came in the oil sector, as Brent crude surpassed $35 per barrel on the news that Iran has welcomed an output freeze. Equities in Asia and Europe carried the torch from North America and gained on Thursday, extending the risk rally that began at the end of last week. It was rather quiet on the data calendar with only Chinese inflation garnering top tier status, beating expectations and showing a 1.8% increase over the same period one year ago. European Central Bank meeting minutes were released a few minutes ago, offering similar insight to the committee’s meeting in January. This comes one day following the FOMC meeting minutes, which showed a cautious Fed continues to weigh further rate hikes as global economic uncertainty remains elevated. Today in North America, US weekly jobless claims headline a quiet slate.
Oil continued to extend gains on Thursday as it was revealed Iran has welcomed plans by Russia and Saudi Arabia to freeze output. Brent crude added 7% from the previous session, pushing through $35 per barrel, while West Texas Intermediate moved up to $31 per barrel, more than 3% higher over the last twenty-four hours. The big dollar has slipped a bit against the commodity currency bloc, as the Canadian, Australian and New Zealand dollar have all seen gains for the third straight session. The Aussie dollar had a bit tougher time as it was divulged employment dropped 7.9k jobs in January, after huge gains two of the previous three months. Chinese inflation increased at an annual rate of 1.8% in January and the People’s Bank of China revealed they would in fact increase liquidity operations, allowing a bit more sway in the yuan exchange rate.
The European slate was a bit more tempered, as economic data was sparse and all eyes turned to the ECB minutes. Similar to the Fed, European monetary policymakers see increased risks to economic outlook on the downside have increased markedly since December. Unlike the Fed minutes, the ECB made it clear the committee is read to act preemptively to counter those downside risks. The minutes also support recent comments from ECB Chairman Draghi that further easing is on the table at next month’s meeting, when new macroeconomic projections would be made available to the committee. Turning back at yesterday’s FOMC minutes, there were not many surprises. Like Chairman Yellen’s testimony last week, the minutes took a more dovish tone, echoing the ECB that downside risks have grown and more consideration would be warranted upon making any decision to raise rates again.
Stronger weekly US jobless claims were released this morning, showing only 262k Americans filed first time unemployment claims for the week ending February 12th. The broad US dollar index is trading lower on Thursday on the back end of this jump in oil prices, but continues to see strong gains against the euro and pound. The euro is now about 2.5% below last week’s highs but remains above key psychological levels following an upside break from prolonged consolidation. The big dollar remains a loser versus the commodity bloc, as previously reported. At 10am, markets will get a peek at the official weekly supply report from the US government’s Energy Information Administration. All quiet on the Canadian front, despite more Loonie gains on the back of the rally in oil prices. The Canadian dollar has extended gains and is now putting to test its strongest levels since the beginning of the month. Retail sales and inflation close out a quiet week.
Further reading:Get the 5 most predictable currency pairs