Monthly Archives: June 2018

Dollar Trading Mixed As Weekend Approaches

The dollar is turning in a mixed performance against its major rivals Friday afternoon. The buck is down against its major European rivals, but is gaining ground against the Japanese Yen.

EU leaders have reached an agreement on migration, which should help avert a political crisis in Germany. Chancellor Angela Merkel’s coalition government was under strain over migrant policy.

A report released by the Commerce Department on Friday showed personal income in the U.S. increased in line with economist estimates in the month of May, although the report also showed weaker than expected growth in personal spending.

The report said personal income climbed by 0.4 percent in May after edging up by a downwardly revised 0.2 percent in April.

Economists had expected income to rise by 0.4 percent compared to the 0.3 percent increase originally reported for the previous month.

Meanwhile, the Commerce Department said personal spending rose by 0.2 percent in May after climbing by a downwardly revised 0.5 percent in April.

Personal spending had been expected to increase by 0.4 percent compared to the 0.6 percent growth originally reported for the previous month.

Chicago-area business activity unexpectedly grew at a faster rate in the month of June, according to a report released by MNI Indicators on Friday.

MNI Indicators said its Chicago business barometer climbed to 64.1 in June from 62.7 in May, with a reading above 50 indicating growth. Economists had expected the index to drop to 60.0.

The dollar has dropped to around $1.1665 against the Euro Friday afternoon, from an early high of $1.1563.

Eurozone inflation increased in June on food and energy prices, flash data from Eurostat showed Friday. Inflation rose to 2 percent in June, in line with forecast, from 1.9 percent in May. The European Central Bank’s targets ‘below, but close to 2 percent’.

Germany’s retail sales decreased for the first time in seven months in May, figures from Destatis showed Friday. Retail sales decreased unexpectedly by 1.6 percent annually in May after climbing 1 percent in April. Sales were forecast to climb 1.9 percent.

Germany’s unemployment rate remained at record low in June, reports said citing the Federal Labor Agency on Friday. The jobless rate held steady at 5.2 percent in June, the lowest since German reunification in 1990. The rate also matched economists’ expectations.

Germany’s import prices increased for the second straight month in May, data from Destatis showed Friday.

Import prices climbed 3.2 percent year-over-year in May, well above the 0.6 percent rise in April.

Data also showed that export prices grew 1.3 percent annually and by 0.5 percent monthly in May.

France’s consumer price inflation accelerated in June on energy and food product prices, provisional estimate from the statistical office Insee showed Friday. Consumer price inflation rose to 2.1 percent in June from 2 percent in May. The rate came in line with expectations. Final data is due on July 12.

The buck has fallen to around $1.3190 against the pound sterling Friday afternoon, from a high of $1.3068 this morning.

The UK economy expanded more than the previous estimate in the first quarter, data published by the Office for National Statistics showed Friday. Gross domestic product grew 0.2 percent sequentially in the first quarter, which was revised upward by 0.1 percentage points, reflecting improvement in construction output.

UK mortgage approvals increased to a 4-month high in May, the Bank of England said Friday. The number of loans approved for house purchases increased to 64,526 in May from 62,941 in April. This was the highest since January and above the expected level of 62,200.

UK consumer sentiment weakened in June largely on weak economic outlook, reports said citing survey data from market research group GfK, on Friday. The consumer confidence index fell to -9 in June from -7 in May. The score was forecast to remain unchanged at -7.

The greenback has climbed to around Y110.850 against the Japanese Yen Friday afternoon, from a low of Y110.374 this morning.

Japan’s industrial production decreased at a slower-than-expected pace in May, preliminary figures from the Ministry of Economy, Trade and Industry showed Friday.

Industrial production dropped a seasonally adjusted 0.2 percent month-over-month in May, reversing a 0.5 percent increase in April. It was the first decline in four months. Economists had expected a 1.0 percent fall for the month.

Japan’s housing starts grew unexpectedly in May, data from the Ministry of Land, Infrastructure, Transport and Tourism revealed Friday. Housing starts advanced 1.3 percent annually, faster than the 0.3 percent increase seen in April. Housing starts were forecast to drop 5.7 percent in May.

Japan’s unemployment rate decreased in May to the lowest level in nearly twenty six years, data from the Ministry of Internal Affairs and Communications showed Friday. The seasonally adjusted jobless rate dropped to 2.2 percent in May from 2.5 percent in April.

Japan’s consumer confidence weakened marginally in June, survey data from the Cabinet Office showed Friday. The seasonally adjusted consumer confidence index dropped to 43.7 in June from 43.8 in May. Meanwhile, the index was forecast to remain stable at 43.8.

The material has been provided by InstaForex Company – www.instaforex.com

Treasuries Close Roughly Flat Following Choppy Trading Session

Following the moderate pullback seen in the previous session, treasuries showed a lack of direction throughout the trading day on Friday.

Bond prices bounced back and forth across the unchanged line before closing roughly flat. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.849 percent.

Traders largely shrugged off news of China easing restrictions on foreign investment in certain sectors amid lingering concerns about a global trade war.

On the U.S. economic front, a report released by the Commerce Department showed personal income increased in line with economist estimates in the month of May, although the report also showed weaker than expected growth in personal spending.

The report said personal income climbed by 0.4 percent in May after edging up by a downwardly revised 0.2 percent in April.

Economists had expected income to rise by 0.4 percent compared to the 0.3 percent increase originally reported for the previous month.

Meanwhile, the Commerce Department said personal spending rose by 0.2 percent in May after climbing by a downwardly revised 0.5 percent in April.

Personal spending had been expected to increase by 0.4 percent compared to the 0.6 percent growth originally reported for the previous month.

A separate report from the University of Michigan showed consumer sentiment improved by much less than initially estimated in the month of June.

The report said the consumer sentiment index for June was downwardly revised to 98.2 from the preliminary reading of 99.3.

The index for June is still slightly above the final May reading of 98.0, although economists had expected a much more modest downward revision to 99.2.

Surveys of Consumers chief economist Richard Curtin said the downward revision was largely due to concerns about the potential impact of tariffs on the domestic economy.

Next week’s trading may be somewhat subdued due to the July 4th holiday on Wednesday, although the monthly jobs report is likely to attract attention along with reports on manufacturing and service sector activity.

The Federal Reserve is also scheduled to the release the minutes of its latest monetary policy meeting, which may shed some additional light on the outlook for interest rates.

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BRAZIL: Ibovespa Rises With Voting Intention Poll, External Scenario

Ibovespa, the benchmark stock index in Brazil, rose 1.63% to 71,766.52 points Thursday with a new voting intention poll for October’s presidential election in Brazil and the improvement of the external scenario.

Domestic issues such as the lowest primary deficit for May since 2015 and the confirmation of the scenario of maintenance of the basic interest rate in the Central Bank’s Quarterly Inflation Report (RTI) also helped the index accelerate gains throughout the day.

“Today, Ibope’s research has brought a different scenario from Datafolha’s research, showing that Jair Bolsonaro may have hit the ceiling and other contenders may begin to gain ground over the next few months,” said Lerosa Investimentos analyst Vitor Suzaki.

The expectation of agents is that pro-market candidates could start to do better in polls. In the scenario without former president Luis Inacio Lula da Silva, Jair Bolsonaro leads with 17% of the voting intentions, trailed by Marina Silva (13%), who appears ahead of Ciro Gomes (8%) and Geraldo Alckmin (6%).

The shares of Banco do Brasil (+5.75%) and Ita? Unibanco (+2.77%) recorded strong gains.

Meanwhile, lower-than-forecast Gross Domestic Product (GDP) data in the United States has dampened concerns about rising interest rates in the country, which is positive for emerging-country assets.

Among the Ibovespa’s highest additions were Gol’s (+4.52%) and Natura’s shares (+4.26%), while JBS’s (-2.30%) lead the day’s losses, followed by Suzano’s (-1.84%) and BRF’s (-1.43%).

The locally traded U.S. dollar closed down 0.49%, quoted at R$ 3.8570, influenced by the foreign market, where the U.S. GDP data caused the foreign currency to lose value at a global level.

Emerging country currencies have benefited, with most trading higher after recent losses.

The material has been provided by InstaForex Company – www.instaforex.com

BRAZIL: DI Rates Close Lower With USD, Central Bank, Opinion Poll

The one-day interbank deposit futures rates (DI rates) in Brazil ended lower Thursday, reacting to the Quarterly Inflation Report (RTI). Investors perceived a soft tone by the Brazilian Central Bank regarding the effect of the truckers’ strike on inflation (IPCA).

They also saw in the downward revision in the estimate for economic growth (GDP) in 2018 a greater chance of basic interest rate to remain stable until the end of the year. The fall of the locally traded U.S. dollar helped in the forward curve movement.

“The market has read the RTI optimistically,” said Nova Futura chief economist Pedro Paulo Silveira. He highlighted the Central Bank’s emphasis on weak activity and the transitional aspect of the price shock coming from the truckers’ strike.

In a report, Itau points out that the Central Bank’s projections for inflation and GDP point to a relatively comfortable scenario, which reinforces the prospect of stability in the basic interest rate. “We keep the view that the Selic should remain at 6.50% until at least the end of this year,” said the bank’s chief economist, Mario Mesquita, in the report.

In addition, Silveira, from Nova Futura, noted that the domestic market also “breathed a sigh of relief” with the numbers on the presidential race brought
by the CNI-Ibope poll, which brought former senator Marina Silva “nearing” Jair Bolsonaro’s voting intentions.

“The positive news, although timid, helped to interrupt the devaluation cycle of the Brazilian real,” he said.

The January 2019 DI contract rate was at 6.825%, from 6.97% in the previous settlement, while the January 2020 DI rate ended at 8.33%, from 8.55%. The January 2021 DI contract rate was at 9.35%, from 9.55%.

The material has been provided by InstaForex Company – www.instaforex.com

COLOMBIA: Country Can Reach Coffee Production Of 18 Million Sacks

President Juan Manuel Santos said that Colombia can soon reach a coffee production of 18 million sacks.

“I think the future of Colombian coffee is good, promising,” he said during a sectoral convention that took place in the department (state) of Caldas.

The president said that in the last eight years, Colombia managed to almost double the production of the grain and achieve revenues of over 7 billion pesos.

“It’s something that has a very important effect on the indicators, in the economy and that has to be kept and strengthened,” he said. Santos added that “it is totally possible to achieve a production of 18 million sacks,” from around 14 million sacks currently.

The material has been provided by InstaForex Company – www.instaforex.com

Crude Oil Surges 20% In Second Quargter

The surge in crude oil prices continued Friday, marking a 20% year-to-date increase in crude oil prices.

WTI light sweet oil climbed 70 cents, or nearly 1%, to settle at $74.15/bbl. — the highest in four years.

Prices have skyrocketed in June due to dwindling U.S. inventories and signs that OPEC will struggle to meet production quotas.

“We are in a very attractive oil price environment and our house view is that oil will hit $90 by the end of the second quarter of next year,” Hootan Yazhari, head of frontier markets equity research at Bank of America Merrill Lynch, said.

“We are moving into an environment where supply disruptions are visible all over the world. and of course President Trump has been pretty active in trying to isolate Iran and getting U.S. allies not to purchase oil from Iran,” he added.

Baker Hughes said the US oil rig count dropped for second week in a row.

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BRAZIL: Government Works To Get Eletrobras Privatization Bill Voted Next Week

The Brazilian government is working with allied representatives to get the bill which authorizes the sale of six Eletrobras power distributors in the North and Northeast regions voted next week, said the minister Mines and Energy, Moreira Franco.

Asked whether this might not happen and the auction scheduled for July 26 is postponed for later this year, the minister merely said that the government is working to get the bill voted next week.

“After Brazil’s match on Monday the expectation is that the representatives are more brightened and the voting can happen,” said the minister.

The bill incorporates some points of the decree which changed rules of the national electricity system but was removed from the agenda due to lack of consensus among parliamentarians.

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