Crude Oil Volatility Continues Ahead of April 17 Meeting

Daily Analysis - 05/04/2016

Crude Oil Turns Volatile Ahead of April 17th Meeting


Oil prices were volatile yesterday but the losses were limited in comparison to the declines last week. WTI crude oil futures for May delivery settled yesterday at $35.48 a barrel. Traders are focused on the upcoming April 17th meeting in Doha which is expected to see the next round of talks on a production freeze agreement. However cracks still remain with Saudi Arabia noting that it would limit its oil production levels only if Iran among other countries joins the deal. Iran's oil minister said on Sunday that the country's oil exports increased by 250k barrels per day in March, exceeding 2 million bpd. Earlier in March, Iran said that it would freeze its oil production output only when the country reaches output of 4 million barrels per day.

Yen Starts the Week on a Firm Footing

The Japanese yen posted broad gains across the board in yesterday's trading despite initially opening weaker. Investors continued to adjust their positions to the Fed's cautious plans for hiking interest rates. However, Boston Federal Reserve president Eric Rosengren warned yesterday that the markets were getting too complacent and noted that rate hikes might not be "gradual." Following Federal Reserve chairwoman Janet Yellen’s comments last Tuesday, the markets are currently pricing in a probability of a 26% probability for a rate hike in June and a 66% probability for December according to CME's Fed funds futures. USDJPY settled yesterday at 111.31. USDJPY remains vulnerable to a lot of event risks this week with Wednesday seeing the release of the March FOMC’s meeting minutes which will be followed by a speech by Janet Yellen on Thursday alongside Japan’s trade balance data.


Eurozone Unemployment Rate Falls to 10.30%

In positive news for the Eurozone, latest unemployment data from the region released by Eurostat on Monday showed a fall in the Eurozone unemployment rate to 10.30% in February, the lowest since 2011. January's unemployment rate was revised higher from 10.30% previously to 10.40%. The euro was little changed on the data which also saw a simultaneous release of the Eurozone Producer Price Index. For the month of February, PPI fell 0.70% missing forecasts of -0.50% while January's PPI was revised from -1.0% to -1.10%. In the twelve months to February, PPI declines accelerated to 4.20% more than January's -3.0% revised print. Although the EURUSD initially lost ground, the single currency managed to pare its losses and remained well supported above $1.135.


RBA Left Interest Rates Steady at 2%

As expected, the RBA's monetary policy meeting today saw the benchmark interest rates remaining unchanged at 2.0% but the recent appreciation of the Australian dollar saw the RBA talk down the AUD noting the near 7.0% increase in the exchange rate.


US Employment Trends Index Falls in March

The Conference Board's employment trends index fell 0.80% in March, down from 1.10%. The CB employment trends index aggregates the initial jobless claims, job openings and industrial production data. The decline in the employment trends index is being seen as a sign of weakening in the US labor market. The Conference Board's chief economist Gad Levanon said that it was difficult to expect the US continue to add 200k jobs while economic output was barely growing at a 2% rate. The data comes following last Friday's March nonfarm payrolls report which saw the US unemployment rate rise from 4.9% in February to 5% in March. However, average hourly earnings increased at a pace of 2.30%, more than the expected 2.20% estimates.


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