20150721 - Exchange Market with Commodity

Source: CNBC.com

Gold dropped by 0.3% on Tuesday; it is about 4.6% for 5 days. Sellers dumped an estimated 33 tons in just two minutes, which caused sudden 2.6% dropped on Monday. Emerging of increase in U.S. interest rates drags down gold price.

Chinese government revealed its gold reserves first time after 2009, far less than the market had estimated. The Chinese central bank said its gold reserves were 1,658 tons as of the end of June. The reserves were 1,054 tons in April 2009. This 60% increment, which is below market estimation, suggests that demand is not as strong as what they’ve expected.

Source: CNBC.com

Crude oil gained 1.16% on Tuesday. It shows a steady movement despite U.S. – Iran nuclear deal set up. Downfall is restricted as potential political conflicts still exists. Many experts say that the sanctions won’t be lifted at least six months; possibly a year. Yet geopolitical issue has been eased, which led to 1.45% drop on Monday. Today’s increment is a bounce back from Monday.

Source: Yahoo Finance

Source: Yahoo Finance

USD is depreciated by 0.46% on July 21^st while appreciated by 1.25% on 5-day basis. While there was a lack of significant economic event today, market participants keep eyes on U.S. interest hike and market stimulus from the Chinese government as the Greek issue eases.

            On Tuesday, the Greek government submitted legislation to parliament required by its international lenders to start talks on multi-billion euro rescue package. Yet it is still questionable whether the government bill can be passed. According to the Reuters, Tsipas has 123 seats out of 300 to support the bill. It means that he is likely to need support from oppositions.

Source: Yahoo Finance

           Austrian dollar (AUD) strengths by 0.97% after the Reserve Bank of Australia (RBA) monetary policy meeting minutes released on Tuesday. It states that “commodity prices had fallen… members noted that exchange rate… that further depreciation seemed both likely and necessary.” Market participants expect the RBA to depreciate AUD in future, so they long it today.

            The minute today states that consumption gets little stronger in the U.S., somewhat weaker in China, and Japan remained well below that seen prior to the increase in the consumption tax in 2014. It also states that growth in industrial production across a number of Asian economies had slowed a little bit. The euro area will continue recent trend of improved conditions, but investment is still well below the levels seen prior to the global financial crisis.

            Investment in both the mining and non-mining sectors fall in 1^st quarter. Profits for non-mining firms increased by 6% YoY. Resource exports, including iron ore and coal, had declined in 2^nd quarter. Coal exports had been affected by the several storms.

            The RBA considers that global economic conditions would remain consistent around average. Global financial conditions would remain accommodative even after increase in U.S. interest rates. Yet volatility in Chinese equity markets and issues in Greece require close monitoring. Domestically, it states that its output growth remained below average in 1^st quarter despite very low interest rates supported strong growth in dwelling investment and strong house prices and consumption.

Source: Yahoo Finance

              

            Japanese Yen appreciated 0.36% on Tuesday. It is after reaching peak at 124.1360 on Monday, which is the highest after one-year peak on June 8^th. Today’s strength is likely due to positive comments from the RBA. It states that indicators pointing to modest output growth in Japan on the second quarter. Labor market continuously improves in both wage and unemployment perspectives, which will lead to higher core inflation over time. Yet policy reform needs to address some long-term structural challenges like ageing of the population.