Oil prices add over 1.5% following strong manufacturing data
Global oil prices rose over 1.5% in American trade on Thursday, on track for the first profit in four days following strong European, UK, and US manufacturing data.
Such data underpinned hopes of increasing global demand on fuel, and overshadowed negative US crude inventory data.
Prices
US crude rose 1.8% to $78.63 a barrel, with a session-low at $76.86.
Brent rallied 1.6% today to $82.93 a barrel, with a session-low at $81.23.
US crude lost 1.2% on Wednesday, while Brent shed 1.1%, the third decline in a row amid concerns about weak US demand.
Strong Industrial Data
Recent data showed the European manufacturing sector rebounded in May, with the British industrial sector rushing into growth territory this month, alongside similar growth in the US manufacturing sector.
Such data is a clear sign of improving global GDP growth in the second quarter of the year, in turn boosting fuel demand.
US Stocks
The Energy Information Administration reported a buildup of 1.8 million barrels in US crude stocks last week to 458.8 million barrels, while analysts expected a drop of 2.4 million barrels.
US gasoline stocks fell by 0.9 million barrels to 226.8 million barrels, while distillate stocks rose by 0.4 million barrels to 116.7 million barrels.
US Output
The EIA reported no change in US crude stocks at 13.1 million barrels last week for the tenth week in a row.
Prices Outlook
Commodities’ analysts at UBS said in a memo that oil prices have strived to advance this month as investors remain cautious in regards to ongoing restrictive monetary policies.
The analysts also pointed to persistent concerns about the increasing global crude inventories after a mild winter in parts of the northern hemisphere.
The bank’s analysts expect the oil market to undergo a deficit, with Brent likely rising to $91 a barrel in the next few months.
Dollar backs off one-week high ahead of major US data
Dollar fell in European trade on Thursday against a basket of major rivals away from one-week high, on track for the first loss in six days on profit-taking.
The latest Federal Reserve’s meeting minutes were more bullish than expected, showing that many officials are still dismissive of any steps towards policy easing.
Now investors await important US data on major economic sectors, in addition to unemployment claims data.
The Index
The dollar index fell 0.2% to 104.72, with a session-high at 104.96.
The index closed Wednesday up 0.3%, the fifth profit in a row, marking a week high at 104.97.
Fed’s Minutes
The minutes showed that Fed officials are concerned about the suitable timing of a rate cut, with several members expressing concerns about consumers using riskier financing methods to cover costs due to inflation.
Fed officials pointed to the persistent risks of inflation, with factors including geopolitical events, and they focused on the impact on consumers, especially low-income workers.
The Fed recently announced a decision to maintain interest rates unchanged at below 5.5% at the May meeting.
US Rates
Following the release of the minutes, the odds of a July Fed interest rate cut fell to 16%, while the odds of a September rate cut fell to 57%.
According to the Fedwatch tool, investors now only expect one interest rate cut by the Federal Reserve this year.
Important Data
Later today, US unemployment claims data will be released, expected to have fallen slightly to 220 thousand in the week ending May 17 from 222 thousand.
The US manufacturing PMI is expected up slightly to 50.1 in May, while the services PMI is expected at 51.2, barely down from 51.3 in April.
Gold plumbs one-week trough after hawkish Fed's minutes
Gold prices fell in European trade on Thursday on track for the third loss in a row, plumbing one-week lows after trading below $2400 and moving away from a record high on profit-taking.
The latest Federal Reserve’s meeting minutes were more bullish than expected, showing that many officials are still dismissive of any steps towards policy easing.
Prices
Gold prices fell 1% today to $2355 an ounce, with a session-high at $2383.
The precious metal lost 1.75% on Wednesday, the second loss in a row, and the heftiest since May 13 on profit-taking off a record high at $2450.
Both the dollar and US treasury yields were also boosted today following the release of the Fed’s minutes, in turn undermining gold prices.
Fed’s Minutes
The minutes showed that Fed officials are concerned about the suitable timing of a rate cut, with several members expressing concerns about consumers using riskier financing methods to cover costs due to inflation.
Fed officials pointed to the persistent risks of inflation, with factors including geopolitical events, and they focused on the impact on consumers, especially low-income workers.
The Fed recently announced a decision to maintain interest rates unchanged at below 5.5% at the May meeting.
US Rates
Following the release of the minutes, the odds of a July Fed interest rate cut fell to 16%, while the odds of a September rate cut fell to 57%.
According to the Fedwatch tool, investors now only expect one interest rate cut by the Federal Reserve this year.
The SPDR
Gold holdings at the SPDR Gold Trust remained flat yesterday at 838.54 tonnes, the highest since February 14.
Yen skids to three-week trough on interest rate gap concerns
Yen skidded in Asian trade on Thursday to three-week lows against the US dollar, sharpening losses for the second straight session amid persistent concerns about the Japan-US interest rate gap.
The odds of a Fed interest rate cut in the summer dipped after the release of the Federal Reserve’s meeting minutes, with investors now awaiting more clues.
And following a recent spate of weak Japan data, it’s likely the Bank of Japan will maintain its current ultra-easy policies unchanged for sometime.
The Price
The USD/JPY pair rose 0.1% today to 156.90 yen, the highest since May 1, with a session-low at 156.66.
The yen lost 0.4% on Tuesday, the fourth loss in five days as long-term US treasury yields rebounded.
Interest Rate Gap
The US-Japan interest rate gap currently stands at 540 basis points in favor of the US, and will likely remain so for an extended duration.
US Rates
The recently released Federal Reserve’s meeting minutes showed that Fed officials are concerned about the suitable timing of a rate cut, with several members expressing concerns about consumers using riskier financing methods to cover costs due to inflation.
Fed officials pointed to the persistent risks of inflation, with factors including geopolitical events, and they focused on the impact on consumers, especially low-income workers.
Japanese Rates
Recent weak data from Japan on growth and the services sector proved disappointing, in turn hurting the odds of a Bank of Japan’s interest rate cut this year.
Yen’s Outlook
UBS’s New York analysts believe that markets are ignoring the risks of a BOJ intervention once more, which continues to present a fresh risk of sudden movements.