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ICBC Bank Buys Precious Metals Vault from Barclays

Daily Analysis - 18/05/2016

Acquisition Creates Largest Precious Metals Bank in the Market

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The Industrial and Commercial Bank of China, which is one of the biggest four state owned commercial banks and the world’s largest by assets, has purchased a precious-metals vault from Barclays PLC. The move comes as China extends its influence in the precious metals markets. Earlier in April, China announced Yuan-gold fix in a bid to be a price maker in the precious metal.

UK CPI Declines in April

Inflation data from the UK released yesterday by the Office for National statistics (ONS) showed an unexpected decline in consumer prices for the month of April. Inflation rate fell to 0.30% on a year over year basis in April down from 0.50% increase in March which marked at 15-month high. The decline in the monthly inflation rate was driven by lower cost of air fares and clothing. The inflation rate missed estimates of a 0.50% increase in consumer prices. A month ago, BoE Governor Mark Carney told the markets not to read too much into the March rise in consumer prices which he said was due to an "Easter effect" and that inflation would weaken over the coming months.

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Japan Postpones Sales Tax Hike

Japanese premier Shinzo Abe is set to postpone the much anticipated consumption tax hike which was scheduled for next April, according to reports from the Nikkei. Concerns mount that a planned sales tax hike could derail the efforts to boost prices is one of the reasons for the delay. Abe is expected to announce the proposed delay after the G-7 summit meeting concludes in Tokyo on Friday and Saturday this week. The current tax hike was revised to 7% and was scheduled to come into effect from April 2017.

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US CPI Rises Past Expectations in April

Consumer price index climbed by 0.40% percent in April after inching 0.10% in March, beating estimates of a 0.30% increase. Excluding energy, consumer prices ticked higher with core CPI rising 0.20% in April, extending the 0.10% gains from March, matching estimates. The month over month increase was the sharpest gains seen since February of 2013 with gasoline driving consumer prices higher, increasing by 8.10% and a 3.40% monthly rise in the energy index.

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UK Labor Market and FOMC Minutes

The markets will be looking to the UK's monthly labor market data. Economists expect that the UK's unemployment rate was unchanged at 5.10% in March while a modest uptick is expected in the average weekly earnings excluding bonuses. Last month, jobless claims in the UK rose by 21,000 in the three months to February to a total of 1.7 million. Later in the NY trading session, the FOMC meeting minutes will be likely to set the tone for the US dollar going ahead. Expectations are dovish on the minutes which, according to the statement showed a nearly unanimous vote to keep the Fed funds rate unchanged.

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