Market Analysis – French Election, FED Rate Hike, Oil Turmoil and more

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Here is the today’s Market Analysis by FXPrimus.

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EUR remains weak

EUR is weakening because of political concerns about France.

It should also be weakening from an economic point of view because of falling short-end yields. I think EUR is likely to fall further.

GBP may rebound with budget

The UK 2017/18 Budget to be announced today is likely to include new, higher forecasts for the economy and lower forecasts for borrowing.

That could encourage short-covering and push the pound up.

Oil may fall further

The oil market has been a see-saw between those focusing on OPEC cuts (buy) and those focusing on US inventories (sell).

Now not only are inventories rising, but some OPEC members are boosting output, too. I think oil could fall further.

Dollar little changed

The dollar was little changed overall Wednesday as a rise vs GBP and EUR was balanced by a fall vs JPY.

With little to move USD either way, the impetus from trading came more from the other currencies.

Fed rate expectations moved slightly higher though, supporting the US currency even though the US trade deficit was the widest in 5 years.

Lots of currencies lower: JPY Higher

There were several currencies with negative stories: GBP fell on weak data and concerns about the Brexit process as the House of Lords fiddles with the Brexit bill:

・EUR weakened on worries about the French elections and lower EUR front-end yields.
・AUD weakened on poor China trade figures.
・NZD was the worst-performing G10 currency as milk futures fell.

JPY on the other hand gained on risk aversion in the wake of the North Korean missile test, plus reports that Japanese investors have been selling Treasuries.

Oil, Gold down

Oil plunged after the API reported a huge 11.6mn bbl rise in inventories in the latest week, far above the 1.4mn bbl rise that the market was looking for beforehand.

News that Iran’s exports hit a record and Nigeria is trying to increase output didn’t help, either.

Gold continued to decline on the same reasons as recently: a stronger USD and expectations of rising US interest rates.