September ECB Minutes
The world indices are descending from record highs, while the European investors are tensely waiting for the ECB meeting protocol to get more information about the regulator’s intentions to curtail the monetary stimulus.
CFTC data over the past week showed that hedge funds were gaining positions on the European currency, despite the weak inflation in the eurozone hampering the decisive actions of the central bank. This was also warned by the ECB’s chief economist Platt in his recent comments.
In the past meeting report, only ECB’s expressed concerns about the Euro’s revaluation may pose a threat to the growth of the currency. If this is deemed an obstacle to exit from the ultra-soft credit conditions, then the pair EUR/USD might break through the 1.17 level and wait for the ECB meeting in October in a rather depressed state.
On the eve of NFP
The US currency keeps its balance against the basket of opponent currencies, dropping a little on Wednesday after the release of labour market ADP report, which showed a decline in employment to an 11-month low of 135,000
In our opinion, this figure is quite decent considering the destruction of jobs and the slowing down of the creation of new ones in the regions affected by natural disasters. The natural disasters themselves have already been priced in the market and the difficulty of predicting their effects on the US labour market is somewhat belittling the importance of the NFP report for September. The dollar and the US stock markets are closely following the progress of Trump’s tax reform up to Congress, but how the president is going to convince the senators to push the economy closer to the abyss of the budget deficit is not yet clear. Each year, the government’s debts increase by $ 550 billion, while the total liabilities have already reached 20 trillion. dollars. Trump also proposes to cut taxes by 6 trillion Dollars, which will significantly reduce government revenues. There we could also add ageing generation of the baby boom, which pension and medical expenses will soon begin to put even more pressure on the state budget.
The oil market
Oil prices stabilized on Thursday on expectations that Saudi Arabia and Russia, the largest oil exporters, will reach an agreement to extend the limits for production until the end of 2018. The arrival of the Saudi King Bin-Salman promises favourable prospects for this dialogue.
Libyan oil exports increased, while stocks in the US rose by 1.8M barrels, falling short of the expectations. Oil prices reacted poorly to the report largely due to the almost unchanged value of the capacity utilization of American refineries. The demand for crude oil also remained unchanged at 16 million barrels.