Posted on: 24 February 2016, by: Pepperstone Support, category: Market Review
Amid all the cable selling, there was a noticeable directional bias to be long safe havens into the European close. CHF and JPY remain bid despite pleas from Kuroda that there are “Plenty of room for further cuts in interest rates”. USDJPY has since broken 112.00 but remains steady in illiquid Asian trade. NY, continuing with yesterday’s theme, was focused squarely on pounding cable (9 year lows) and catching oil longs wrong footed (again).
Iran has flat out suggested that a production freeze was ridiculous and this comment sent off a chain reaction, which concluded in several comments from the Saudi oil minister Naimi. The big comment, which helped along a sharp slide of 3.2% in WTI, was as follows:
SAUDI OIL MINISTER SAYS INEFFICIENT, UNECONOMIC PRODUCERS WILL HAVE TO GET OUT.
We think this is a veiled threat at US shale oil producers and confirms a view held by many that the cartel big guns are using their clout on oil supply to price out some dangerous competition from the fracking community. This headline, coupled with a fresh Reuters report that energy firms are beginning to come under pressure from their US liquidity providers and that on top of possibility of seeing a 15 to 20 percent cut in their credit lines, they might be cut all together. This is bad news for risk and should be watched closely. If lines of credit are cut, we have a liquidity issue and where liquidity goes, so does risk trades. The source for the article was the head of JP Morgans commercial bank who relayed this message to investors on Tuesday.
US data was mixed, but the promising trend in US housing continues to gain traction
Consumer confidence fell to 92.2 vs 97.2
January ’16 existing home sales posts a six month high, 5.47m vs 5.32m
The USD was overall mixed, but we did see a pullback in commodity fx given the tear it was on. Kiwi, Aussie, and Cad all pulled back on the selling in oil and other base metals. The S&P500 also followed, finishing down 22 handles on the day. Gold, on the other hand, finished up $15 dollars to 1224 and has since climbed to fresh session highs in Asia around 1231.