20150722 - Exchange Market with Commodity

Source: CNBC.com

            Crude oil declined by 1.83% today; fall below $50, which is the lowest after the financial crisis. This plunging is caused by higher-than-expected U.S. crude oil inventories, worry of oversupply from Iran nuclear deal, and today’s interviews from the OPEC delegates. The OPEC delegates see oil drop as short-term, and expect stronger demand in a long term.

            One of the Gulf delegates said that even if prices fell slightly below $50 a barrel, as long as the drop is for a short time, it is unlikely the OPEC would lower its output ceiling. Despite efforts of the OPEC members, Saudi Arabia is likely to maintain low oil prices to beat the U.S. shale oil industry.

Source: Investing.com

            U.S. crude oil inventory released as 2.468 million barrels, far greater than -2.258 million barrels of forecasts. It was -4.346 million barrels last week. Hike in inventories led to fear of oversupply and slow in economy that drag the oil price down.

Source: CNBC.com

            Gold declined by 1.25% today. Demand issue and strong USD dropped the price. Market participants tend to move to safer assets like U.S. treasury bills.

Source: Yahoo Finance

            USD appreciated by 0.44% against EUR after 0.97% deprecation yesterday. Last night, EUR strengths as Greece debt crisis eased; S&P upgrades Greece’s credit rating by two levels from “CCC-“ to “CCC+”. Increase in German government bond also boosts EUR strength; it increased by 1.69bp last night. On the other hand, decline in oil price caused by oversupply and interviews from OPEC delegates lead to strength in USD against EUR today.

            It is also depreciated by 0.41% against GBP after Bank of England released Monetary Policy Conference meeting minutes. Interest rate in England decided to stay at 0.5%. Yet the meeting ended on July 8^th when European lenders still faced conflicts with the Greece debt crisis. Major concern of the MPC was that increase in interest rate at July would halt Europe’s economic growth. The minute also said that “Overall, committee members agreed that the domestic economy had continued to strengthen over the past year, that the margin of spare capacity had continued to shrink, and that domestic cost pressures had increased.”

            However, the minute showed that at least one of the MPC’s nine members will be favor to increase interest rate in August. As the Greece debt crisis eases down, it is more likely to increase the rate, which is reflected in the market today after the minute was released.

                                                     Source: Yahoo Finance

              AUD depreciates as USD gets stronger and commodity prices fall down. Like what RBA said yesterday, the RBA believes that AUD needs depreciation further. Yesterday’s sudden strength was caused by arbitrage opportunity between market participants and the RBA. AUD bounces back to yesterday’s level; it is weaken by 0.62% today.