Wednesday report from the API Institute came as a saving grace to the Oil market, which was sinking in the supplied excess. The market managed to pare half of the 2% drop on Thursday as the agency data showed that the commercial reserves in the US have shrunk almost four times more than expected – 8.7M with a forecast of 2.5M barrels. The total number of stockpiles averaged at 513.2M barrels. In addition to the forecast, the accelerated recovery of Deepwater production in the US, the quotes were also pressured by the news that Trump plans to withdraw from the agreements against climate change. This was done to remove international restrictions on the wells development that may cause pollution or damage to the ecological environment. Trump’s proposal to begin selling out strategic reserves to raise funds for the budget puts a dent in the prospects of market rebalance. Although yesterday’s decline can also be regarded as a speculative manoeuvre, market participants are trying to find a firmer ground where longs will be reloaded. Rising prices in the medium term remain the most likely scenario, so the trade recommendations remain unchanged – a call focused on medium-term price increase (reaching a psychologically important level of $ 50 per barrel, and then a steady growth with corrections).
Gold liquidates the monthly declines, meeting some headwinds at $1,270, the maximum point since the end of April. The asset growth was facilitated by political instability in the White House, the search for Kremlin’s hand in Trump’s victory of the presidential election and related to this case dismissal of the FBI director James Comey. His controversial memo, indicating that the president was trying to stand up for the retired adviser Michael Flynn, has started a new independent investigation of Trump’s relations with Russia. In addition, expectations of June´s FED rate hike have had a negative impact on the asset yields, which in turn dampens the demand for it.
Demand for the housing in the UK continues to fall. According to the Nationwide Building Society, prices are down for the third consecutive month, the real estate market is experiencing the worst time in 8 years. Among the possible reasons is a slide in purchasing power due to inflation ahead of wage growth, heavy clouds over the outcome of Brexit are also a deterrent. The cheap Pound has really cut down household spending. Britons are less likely to afford expensive purchases, which is illustrated by the car registration statistics. After steady growth in the first quarter, the number of registrations decreased by 19.8% compared to the same period in 2016. This indirectly indicates a decrease in the consumer confidence in the UK. The consumer confidence index GfK remains in the zone of pessimism for more than a year. The news provoked a decrease in Sterling by 0.3%, but the hopes for a confident victory of May´s party in the parliamentary elections allow the Sterling to maintain a relative equilibrium near the level of 1.30.
The publication of the Beige Book propped up the Dollar a bit as the FED’s relatively bold projections on economic pickup fostered bets of a rate hike. The Dollar stabilised in the range of 97.00-97.50 in anticipation of news from the White House and the decision on the FED’s interest rate in the middle of the month.
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