Solid ECN - The value of US natural gas futures has dropped to a nine-month low, falling under $2.1/MMBtu. This decrease is attributed to diminished demand and an upsurge in supply. The demand for heating is projected to decline further due to the forecast of above-average temperatures lasting until February 7th. In the meantime, gas production is on a recovery path following disruptions caused by a recent Arctic storm.
Current data indicates that gas storage levels are 5.2% above the typical seasonal average. Concurrently, it’s anticipated that US LNG feed gas won’t reach its peak levels until mid-February when the Freeport LNG export facility in Texas is expected to be fully operational again.
Dollar Index Stays Strong as Fed Dims March Rate Cut Hopes
Solid ECN - The dollar index remained stable above 103.5 on Thursday, staying close to its highest point in seven weeks following comments from Federal Reserve Chair Jerome Powell that diminished expectations for an interest rate decrease in March. During the Fed's press briefing, Powell indicated that lowering rates in March did not align with the central bank's primary scenario and emphasized the importance of keeping rates steady until there's significant evidence that inflation is on a downward path to the 2% goal.
The Fed's likelihood of a rate reduction in March has decreased sharply to 38% from 89% just a month earlier. Investors are now paying attention to the upcoming weekly unemployment claims, the ISM PMI data on Thursday, and the eagerly awaited monthly employment report on Friday. While the dollar gained strength against most major currencies, it saw a decline against the Japanese yen. This shift was primarily due to concerns surrounding New York Community Bancorp, a regional bank in the U.S., which led investors to seek more secure assets.
Solid ECN - In November 2023, Hungary reported a significant improvement in its trade balance, with a surplus of €1,580 million. This is a notable change compared to the €1,395 million deficit experienced in the same month the previous year. The country has enjoyed a continuous trade surplus for ten months, reaching its highest level since 1999. The decrease in exports was relatively minor at 3.1%, totaling €12,983 million, whereas imports saw a more substantial drop of 23%, amounting to €11,404 million.
Most of the trade, involving imports and exports, was with European Union countries, making up 77% of exports and 75% of imports. From January to November, Hungary achieved a trade surplus of €9,509 million.
Solid ECN - On Thursday, WTI crude oil prices climbed above $76 for each barrel, making up for some of the previous day's losses, influenced by a brighter demand forecast. Fatih Birol, the head of the IEA, recently predicted that in 2024, global oil demand would grow by 2 million barrels daily, a significant increase from the earlier estimate of 1.24 million barrels per day.
The likelihood of interest rate reductions is significant in economies, and several economic boost measures in China, the leading oil importer, further enhanced this outlook. Additionally, concerns about the Houthi attacks on shipping in the Red Sea and the potential for a direct clash between the US and Iran, which could interrupt worldwide oil trade, continued to add a premium to oil prices. In contrast, official data revealed a surprising increase in US crude oil stocks by 1.234 million barrels last week, contrary to market predictions of a 0.217 million barrel decrease.
FTSE 100 Rises on Bank Decision, Shell and BT Profits
Solid ECN - The FTSE 100 saw a modest increase of 0.4% on Thursday, boosted by upbeat company news and the Bank of England's latest decision on interest rates. The rates remained the same, but the voting showed differing opinions, with two members wanting to raise them and one opting for a reduction. The bank also lowered its expectation for inflation this year and removed a mention of more rate hikes.
Still, it stressed the importance of keeping rates higher until inflation returns to the 2% goal. Shell's shares jumped 2.5% after it announced a 4% dividend rise and ongoing stock buybacks, even though its profits dropped in 2023. Additionally, BT's shares increased by more than 1% thanks to its revenue and yearly profits.
Silver Prices Dip to $22.6 Amid Altered Fed Rate Outlook
Silver prices fell to approximately $22.6 per ounce following investor expectations that the Federal Reserve would not lower interest rates in March. This sentiment arose after Fed Chair Powell indicated that monetary policy easing early in the spring was improbable. However, Powell's decision to stop suggesting further rate hikes led investors to anticipate 140 basis points in Fed rate cuts for the year, an increase from the previously estimated 130 basis points—the decline in the U.S.
Treasury yields and financial difficulties faced by the regional bank New York Community Bancorp also bolstered the appeal of silver as a secure investment. Attention is now turning to upcoming economic indicators, including weekly jobless claims, the ISM PMI reports on Thursday, and the crucial monthly employment report on Friday. Additionally, the price of XRPUSD is now above the weekly pivot.
Solid ECN - On Friday, WTI crude oil prices stabilized at about $74 per barrel, facing a roughly 5% drop over the week. This shift came as tensions in the Middle East appeared to calm, reducing fears of interruptions in oil supply. There were discussions about a possible ceasefire between Israel and Hamas, with Hamas examining the proposal.
The hope was that peace in Gaza might prevent further Houthi assaults on Red Sea shipping lanes, which have been affecting global trade and oil distribution. Despite these discussions, a Qatari official said no ceasefire had been reached. In the meantime, OPEC+ decided to continue with its existing production strategy, maintaining a reduction of 2.2 million barrels per day into the next quarter. On another note, the global oil demand is expected to rise by 2 million barrels per day in 2024, significantly above the earlier prediction of 1.24 million barrels per day, as per the Energy Information Administration (EIA).
Solid ECN - WTI crude oil prices stabilized at just over $72 per barrel on Monday, recovering from a significant drop last week. This shift came as traders kept an eye on the situation in the Middle East. Oil prices had fallen by over 7% the previous week due to advancements in peace talks between Israel and Hamas, which reduced worries about potential supply issues.
Additionally, the decreasing likelihood of immediate interest rate reductions by the US Federal Reserve and ongoing concerns over China’s economic growth put pressure on the worldwide demand forecast. On another note, the US announced plans for more military actions against groups supported by Iran, heightening tensions in the Middle East. However, it clarified its intention to avoid escalating the conflict further.
Solid ECN - Gold prices dropped to around $2,030 per ounce on Monday, continuing the decline from the last session. This drop was influenced by robust US economic reports and clear indications from the Federal Reserve that there might not be immediate cuts in interest rates. Recent data on Friday indicated that the US job market grew significantly in January, with 353,000 new jobs added, a jump from the revised figure of 333,000 in December and much higher than the anticipated 180,000.
The Federal Reserve's Chair, Jerome Powell, in an interview with "60 Minutes" that aired on Sunday, committed to a cautious approach towards reducing interest rates this year. He emphasized the need for further proof that inflation consistently reaches the 2% target before making significant moves. Powell mentioned that any action by the Fed would likely be slower than what the markets are expecting. Following these developments, traders have scaled back their expectations for a rate cut in March to just 20%. They foresee a total reduction of about 137 basis points in interest rates for the year, less than the previously estimated 150 basis points.
Solid ECN - The euro dropped to its lowest value since November 13th, at $1.075, because of a strong US dollar. People had less hope for the US Federal Reserve to start reducing interest rates soon after a strong US job report and cautious words from Jerome Powell, the Federal Reserve Chair, about lowering rates. Meanwhile, the European Central Bank (ECB) is expected to delay easing its monetary policies even though recent data shows the economy is not doing well.
Reports indicated that in December, the drop in prices manufacturers get for their products worsened in the Eurozone, and Germany saw a bigger-than-expected decrease in exports due to low demand worldwide. The Ifo Institute noted that a lack of manufacturing orders is increasingly problematic for Germany's economy. Market predictions for ECB rate cuts by the end of the year have decreased to about 125 basis points from 138 points last week.
The Mexican peso weakened past the 17.1 per USD level, retreating from a two-week high of 17.07 USD seen February 1st, amid US dollar strength driven by a strong labor market. The greenback found support from lowered bets for early Fed interest rate cuts after the US economy created nearly double the number of jobs than anticipated, totaling 353K jobs.
Despite this, the peso's decline was tempered by business confidence, maintaining an eleven-year high at 54.5 in January and the PMI remaining in expansionary territory. Furthermore, although fourth-quarter GDP growth fell short of expectations, the data indicated a resilient Mexican economy. Combined with inflation persistently exceeding Banxico's target, there could be a delay in the first rate cut despite some officials suggesting the possibility of rate reductions in the first quarter of 2024.
Euro Hits Low Amid Dollar Strength and ECB Caution
Solid ECN - The euro dropped to $1.075, its lowest since November 13th, as the US dollar grew more robust. This change came after the latest US jobs report showed strength, and the head of the US Federal Reserve, Jerome Powell, hinted at being careful about lowering interest rates. Meanwhile, the European Central Bank seems unable to ease its monetary policy, even with recent weak economic indicators.
Reports showed that in December, the drop in prices producers received in the Eurozone got worse, and Germany's exports decreased more than expected due to low worldwide demand. The Ifo Institute also mentioned that the lack of manufacturing orders is increasingly troubling for Germany's economy. Market predictions for the European Central Bank to cut rates by the end of the year have decreased to about 125 basis points from 138 basis points the previous week.
Solid ECN - Steel rebar futures have been climbing, approaching the CNY 3,900 per ton mark. This increase comes after a two-week low of CNY 3,850 on January 18th. The market is reacting to the possibility of economic support from the Chinese government, which could boost demand for steel used in construction and manufacturing.
There's growing optimism that a significant aid package from Beijing might lessen fears about decreasing demand in these sectors. However, economic challenges, especially a drop in property purchases, have significantly reduced major Chinese steel producers' output. In December, steel production in China fell to its lowest in six years, dropping 15% annually and 11% monthly to 67.44 million tonnes. Despite the price recovery, the absence of purchases has caused rebar stocks in central Chinese warehouses to skyrocket more than five times to 112 thousand tonnes.
Solid ECN - The EURUSD currency pair is testing the 1.07228 support after it crossed below the bearish flag. The pair’s value rose to 1.07619 in today’s trading session, which coincides with the broken channel that now acts as resistance. The awesome oscillator bars turned green, but the RSI indicator is still close to the 30 level. The pullback might extend to the Ichimoku cloud resistance area if the EURUSD bulls can close and stabilize the price above 1.07619.
On the flip side, a failure in the above scenario will lead the EURUSD price to decline further to the next support area, the 1.0658 mark.
Solid ECN - WTI crude oil prices increased to about $73 per barrel on Tuesday, continuing the previous day's gains. This rise was mainly due to growing concerns over potential disruptions to oil supplies from the Middle East, fueled by increasing tensions in the area. Notably, analysts have highlighted recent US airstrikes against militias supported by Iran, though US officials have clarified their intention to avoid a broader conflict in the region.
Despite these tensions, there has been no immediate impact on the oil supply, helping prices recover slightly after suffering significant losses last week. Specifically, oil prices dropped by over 7% last week, driven by advances in peace talks between Israel and Hamas, which diminished fears of supply disruptions from the Middle East. Additionally, reduced expectations for imminent cuts to interest rates by the US Federal Reserve and ongoing worries about China's economic recovery have further pressured the outlook for global oil demand.
Oil Prices Rise Amid Middle East Tensions, Down 7%
Solid ECN - WTI crude oil prices climbed above $73.5 a barrel on Wednesday, marking a third consecutive session of gains due to concerns over potential supply interruptions in the Middle East. Market analysts believe that the ongoing tensions in the region could lead to fears of supply shortages being factored into oil prices.
Despite the US responding with airstrikes on Iran-supported groups in Iraq, Syria, and Yemen and hinting at more to come, Iran appears to continue its support for these militias with weapons and intelligence. However, oil prices have fallen by about 7% since the end of January, influenced by progress in peace talks between Israel and Hamas, dwindling hopes for immediate cuts in US interest rates, and ongoing worries about China's economic rebound affecting global demand.
Solid ECN - US stock futures showed little movement on Wednesday, with investors looking closely at the latest earnings reports during the mid-point of the earnings season. After the market closed, Snap's shares dropped 32% because it did not meet revenue expectations and predicted weak future earnings. On the other hand, Ford's shares increased by 6% thanks to its quarterly earnings surpassing expectations and positive future earnings outlook. Enphase Energy also saw its shares rise by 12%, driven by forecasts of better demand shortly.
During Tuesday's regular trading, the Dow increased by 0.37%, the S&P 500 went up by 0.23%, and the Nasdaq Composite slightly rose by 0.07%. This was because nine out of eleven sectors in the S&P 500, especially materials, real estate, and healthcare, finished the day higher. This improvement was attributed to strong corporate earnings boosting investor mood despite the Federal Reserve's resistance to cutting interest rates. In other corporate news, Palantir Technologies experienced a significant surge of 30.8% after it projected profits higher than what was anticipated. Similarly, GE Healthcare's shares climbed 11.7% following positive earnings announcements.
Solid ECN - The euro fell to a new low of $1.07, its lowest since November 13th, as the US dollar grew more robust. This happened because people lost hope that the US Federal Reserve would start cutting interest rates soon. Meanwhile, the European Central Bank (ECB) is expected to slow down the easing of its monetary policy, even after some weak economic reports. Predictions now show that the ECB might cut interest rates by about 125 basis points this year, a decrease from the 160 basis points forecasted at January's end.
A survey from the ECB showed that people in the Eurozone expect inflation to be around 3.2% over the next year, the lowest expectation since February 2022. Additionally, the Eurozone saw its most significant drop in retail sales in a year this December, while Germany's factory orders increased by 8.9%, the highest in more than three years, mainly due to a very high number of aircraft orders.
The British currency stabilized at around $1.26, staying near its seven-week low point of $1.2515 from February 5th due to the strong US dollar. This happened as investors soon became less optimistic about the US reducing interest rates. Similarly, expectations for a quick interest rate reduction by the Bank of England were dialed down after Chief Economist Huw Pill mentioned that a rate decrease was not imminent, describing it as inevitable but not immediate.
In February, UK interest rates remained at their highest in nearly 16 years, with a notable voting difference: two members favored increasing rates, whereas one was for reducing them. The likelihood of the Federal Reserve cutting rates by May is seen as over 50%, with the Bank of England expected to do the same by June.
Solid ECN - The Australian dollar climbed past $0.65, recovering from lows not seen in 11 weeks. This happened after the Reserve Bank of Australia decided not to change interest rates, a move many anticipated. However, the bank also hinted at raising rates if high inflation continues. It noted that inflation dropped more than foreseen in the last quarter, yet it's unclear when it will stabilize within the desired 2-3% range. Australia's inflation rate was 4.1% year-over-year in the last quarter, a decrease from 5.4% the previous quarter and lower than the predicted 4.3%.
The monthly inflation rate decreased to 3.4% in December from November's 4.3%, not meeting the expected 3.7%. Despite these figures, the Australian dollar is still feeling the heat from a strong U.S. dollar, bolstered by positive economic data from the U.S. and the Federal Reserve's firm stance, which has made people less hopeful for a rate decrease.
