JMMC didn’t revise demand forecast today
OPEC+ ministers will meet virtually on Wednesday but the plan to hike production by nearly 800,000 barrels per day in May is unchanged, according to a Platts report
This is no surprise. There had been some light talk about delays due to rising covid cases in India but demand elsewhere remains solid and growing.
The spot to watch — as always — is Saudi Arabia. A bit more than half of the planned production increase in the month is due to the reversal of Saudi voluntary cuts. If they don’t like the demand picture, they could hold off.
WTI is back to flat on the day at $62.14 after falling as low as $60.66. One-hour chart:
Positive take on JCPOA talks
Iran is in the midst of a brutal run of covid-19, with nearly 500 people dead yesterday (a record).
But the eyes of the world are on the negotiations around a nuclear deal, with talks resuming today.
The President said
“significant progress has been made” but also lamented political hurdles.
Despite that, oil has pared some losses in recent trade. WTI is at $61.51 from a low of $60.66.
Remarks by Ifo economist, Klaus Wohlrabe
- Industrial sector is booming but has problems with pre-production
- 45% of industrial companies complain about pre-production problems, bottlenecks
- Order book situation has improved at least, as well as capacity utilisation
Nothing here that hasn’t really been foreshadowed by the PMI readings over the past few months really. The supply bottlenecks have also led to higher input costs and in turn, putting upwards pressure on prices in general as well.
Latest data released by Ifo – 26 April 2021
- Prior 96.6
- Expectations 99.5 vs 101.2 expected
- Prior 100.4; revised to 100.3
- Current assessment 94.1 vs 94.4 expected
- Prior 93.0; revised to 93.1
Slight delay in the release by the source. The readings miss on estimates but the headline and current assessment show some mild improvement relative to March. That said, expectations see a drop and that may be tied to prolonged tighter restrictions.
As much as vaccine optimism is still part of the bigger picture, the prevailing virus situation does little to ease comfort as measures to curb the virus spread looks set to continue through to the latter stages of Q2 at the very least.
Dollar softer, US futures a little higher
Asian equities are also faring better although Chinese stocks have pared their earlier advance to keep closer to flat levels on the session currently.
That said, a broadly weaker dollar is also some reason for risk trades to keep more optimistic with the greenback surrendering key technical ground since last Friday.
EUR/USD is holding above 1.2100 as it keeps a solid break above the 100-day moving average on Friday, while AUD/USD is leading gains in a push to 0.7770 levels.
S&P 500 futures and Dow futures are up 0.1% while Nasdaq futures are flat.
Elsewhere, 10-year Treasury yields continue to trend more sideways as it holds slightly higher on the day at 1.568% – not much changed since the latter stages of last week.
A look at what is on the board for today
Not much on the board for today, with there being no significant ones. Even the board for the rest of the week seems a bit lackluster in terms of sizes (those near current spot levels at least) so just keep that in mind over the coming days.
There are some modest expiries for EUR/USD at around 1.2100 and some at 1.2140-50 on Wednesday but besides that, there isn’t much else to take note of for now.
It will be a big week in terms of headline risks with key releases, the FOMC and OPEC+ meetings, and big tech earnings releases adding to the mix. So, those might just be the more important factors dictating market sentiment in the days ahead.
29 April to 5 May inclusive (Thursday to Wednesday)
Friday 30th sneaks in, its not actually a holiday but will be taken by many.
Tokyo FX markets will be absent for the holidays with therefore reduced liquidity during the Asian timezone.
Holidays in the 4 prefectures, Tokyo and the western prefectures of Osaka, Kyoto and Hyogo, with a state of emergency will be subdued. Residents of the four prefectures have been asked to reduce outings, to a minimum and refrain from travelling outside the prefectures. Residents of other parts of the country were urged not to travel to the four prefectures.
The good feels on the UK economy are growing, this over the weekend from the Bank of England:
- Bank of England Dep Gov Broadbent sees “very rapid” economic growth at least over the next couple of quarters
Adding now from the EY Item Club over the weekend:
- upgrades its GDP forecasts for 2021
- expects GDP to grow by 6.8% in 2021, previous was +5% (January forecast)
- UK economy expected to climb back to its pre-pandemic peak by the middle of 2022
- Ey looking for a surge in consumer spending after a rise in saving by wealthier households during lockdown
- successful vaccination rollout
- easing of the lockdown
The Ernst & Young accountants’ ITEM Club
- Running for 25 years
- A non-governmental forecasting group
- produces quarterly UK economic forecasts
Research via Goldman Sachs, in summary:
US GDP growth likely to peak in Q2 (citing maximum impact of fiscal stimulus and economic reopening then tailing)
- expect that core PCE inflation will temporarily surge above the Federal Reserve 2% target
- US growth to come in at 10.5% in Q2
- 7% GDP growth forecast for H2 thereafter
Non-US global growth will peak in 3Q 2021
- peak growth rates in Europe, Japan, and EM ex. China, among other economies
For the UK, GS see 7.8% growth for 2021, sees “UK economy is rebounding sharply from the Covid crisis”
In the olden days, comparative growth rates would have implications for monetary policy. Faster growing economies would tend to have higher interest rates, which would have implications for FX rates. Where we are right now is every central bank across DM doing the limbo dance … lower for longer is the mantra so the implications for FX are lesser.