Crude Oil Gains Over 5%, US, UK & Eurozone CPI’s to be Released

Weekly Report - 10/04/2016

Oil Prices Back Near a 6-Day High


Erasing the losses from the previous day, WTI crude oil prices posted a strong rally on Friday, gaining over 5.0% on the day. Crude oil futures for May delivery closed at $39.63.

The markets were mixed last week with crude oil prices turning volatile. Despite closing higher on Friday, the stock markets were unimpressed as the risk off sentiment sent the equities markets lower. Gold prices were flat for the day, closing Friday at $1,240 an ounce

Weekly Review

Last week saw the release of the minutes from the US Federal Reserve and the European Central Bank monetary policy meetings which took place in March. While Fed members felt that policy should remain unchanged on growing risks of inflation failing to rise, in Europe, ECB officials were unanimous in their view of acting strongly which saw the ECB cut interest rates as well as expand the QE bond purchases. EURUSD saw modest moves over the week and a brief attempt to test the high of 1.145 but various ECB officials came out strongly dovish sending the single currency weaker.

It was however a week to remember for the Japanese yen as USDJPY fell to a 17-month low sparking speculation that Japanese officials would intervene to stem the yen's rapid appreciation. However, despite stern warnings from various government officials in Japan, there was nothing concrete in terms of action leaving the yen vulnerable as USDJPY fell to lows of 107.66 before managing to recover by Friday's session.

In the UK, economic data over the week included the PMI’s from the construction and services sector, both of which managed to rise higher from February’s print in the month of March. The British Pound was weaker however with Brexit still being the main reason for the pound’s weakness. On Friday, industrial and manufacturing production numbers came out weaker than expected and the ongoing talks of Tata Steel selling its UK arm remains a big issue as it puts at risk nearly 15,000 jobs in the UK. EURGBP was seen trading comfortably above the 0.80 handle this week after a brief pullback from a 22-month high at 0.81.
From Canada, economic data was mixed for the most part. Initial gains from previous economic reports were erased as Canada's exports fell sharply in February leading to a wider than expected trade deficit. Ivey PMI was also weaker falling from 53.4 in February to 50.1 in March. On Friday, Canada's employment data saw a surprise dip in the unemployment rate, falling from 7.30% in February to 7.10% in March while the economy added 40.6k jobs in the month, more than the forecasted 10.4k.


The Week Ahead

The week ahead will see central bank meetings which include the Bank of England and Canada. No changes are expected in the meetings, especially from the Bank of Canada. For Canada, economic data has been mixed but nothing considered negative enough that would warrant further rate cuts from the BoC. In the UK, with Brexit still being the main theme, the Bank of England is likely to stay on the sidelines.

The week however starts off with China's inflation data coming out with forecasts of a 2.40% rise in inflation expected, softly higher from previously reported 2.30%. Later in the week, China will be reporting the quarterly GDP data. Analysts forecast a soft dip to 6.70% in the first three months of the year, down from the 6.80% growth seen in the final three months of 2015. The data will be followed up by industrial production numbers. A miss on the estimates could however shift market sentiment back into a risk-off mode.

From Australia, the unemployment report for March is expected to show the unemployment rate rise back to 5.90% from 5.80% previously seen in February. The Australian unemployment data has been highly volatile with the unemployment rate initially rising to 6.0% in January before moving back to 5.80%.

Besides China, UK, the Eurozone and the US will also be releasing the monthly consumer price index data. The US CPI figure will be an important indicator to be watched for in light of dovish comments from the Federal Reserve which is expected to hold rates steady until there is steady growth in inflation.


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