For a pretty eventful day with central bank heads speaking and U.K. PM May scoring a victory in parliament, price action in the forex market was relatively calm.
Still, the dollar managed to edge out a win against most of its peers while the pound got a boost after U.K. Conservative lawmakers showed support for the government’s Brexit plans.
- U.S. existing home sales down from 5.45M to 5.43M vs. 5.52M forecast
- U.S. EIA crude oil inventories fell by 5.4M barrels vs. projected 2.1M drop
- Fed head Powell: Case for gradual rate hikes is strong
- Powell: Labor market likely to strengthen further
- ECB head Draghi: Inflation is converging to target
- Draghi: Too early to assess impact on policy of escalating trade tensions
- Saudi Arabia to push for 600K to 800K hike in production?
- Iran oil minister: Open to relaxing compliance from 150% to 100%
- New Zealand economy grew by 0.5% as expected in Q1
Panel discussion of central bank heads
The who’s who of policymakers huddled in the ECB’s Forum on Central Banking in Portugal, so most market watchers were glued to the tube (YouTube, that is) in hopes of catching clues on their next policy moves.
No less than ECB President Mario Draghi, RBA Governor Philip Lowe, BOJ Governor Haruhiko Kuroda, and Fed Chairman Jerome Powell were all present!
Draghi was first to speak and he reiterated the need for a patient approach to monetary policy. Traders zoned in on his comments regarding trade tensions, in particular, although he mentioned that it’s still too early to assess its impact on policy.
On a more upbeat note, Draghi also noted that inflation is converging to their target and that the factors keeping a lid on wage growth are subsiding.
Fed head Powell was even more optimistic, though, as he repeated that the case for continued gradual rate hikes is strong. He reiterated that the U.S. economy is performing well and that the employment is likely to strengthen further. In addition, he explained that moderate wage gains are a sign that the jobs market isn’t too tight.
PM May gains parliamentary support
After several tense debates and a couple of MPs in wheelchairs, No. 10 was finally able to secure crucial support from parliament on the EU Withdrawal Bill, which is basically their game plan in the post-Brexit world.
Just when it seemed the proceedings would end without a vote, Prime Minister May gained the support of the Conservative Party after its leader Dominic Grieve conceded on the eleventh hour. He admitted:
“We’ve managed to reach a compromise without breaking the government – and I think some people don’t realize we were getting quite close to that. I completely respect the view of my colleagues who disagree, but if we can compromise we can achieve more.”
Of course this was still met with some disappointment among a handful of Tory rebels while others think that the Government has much bigger problems to face when it negotiates with the EU next.
More OPEC chatter
The excitement is building up ahead of the OPEC meeting this week as more energy ministers arrive in Vienna and share their initial thoughts on proposed output deal adjustments.
In an interview with CNN, Iran’s oil minister Bijan Zanganeh conceded that the cartel should take action in order to address the surge in oil prices. Recall that the country was widely expected to oppose Saudi Arabia’s push to raise production levels. Zanganeh suggested that adjusting compliance could be an option:
Relaxing compliance this way would mean pumping an additional 1 million barrels per day to global supply.
“The compliance, or I say over-compliance, is close to, in recent months, 150 percent. It doesn’t need any agreement or resolution from OPEC to comply 100 percent.
Meanwhile, intel from the pre-game meeting between Saudi Arabia and Russia indicated that they could push for a collective production increase of 600K to 800K barrels per day. A source familiar with the talks shared that this increase could be distributed proportionally among OPEC and non-OPEC producers.
Major Market Mover(s):
The Greenback regained its spot as the king of pips, buoyed higher by Powell’s hawkish remarks and the resulting pickup in U.S. bond yields.
USD/JPY advanced from 110.02 to a high of 110.46, USD/CHF recovered from a low of .9936 to a high of .9972, EUR/USD retreated from the 1.1600 area to a low of 1.1569, and AUD/USD is down to .7367.
The pound wasn’t one to get left behind as it was able to take advantage of the improvement in sentiment after U.K. PM May secured a crucial victory in parliament to push through with their Brexit plans.
However, the U.K. currency was unable to dethrone the Greenback from the top spot.
GBP/JPY climbed from 144.79 to a high of 145.51, EUR/GBP dipped back to .8788, GBP/AUD rose from the 1.7800 mark to a high of 1.7909, and GBP/NZD bounced to 1.9212.
Watch Out For:
- New Zealand Q1 GDP came in line with estimates of 0.5% growth
- 1:30 am GMT: RBA Bulletin