U.S. Session Forex Recap – Feb. 24, 2017

U.S. Session Forex Recap – Feb. 24, 2017

U.S. initial jobless claims at 244K vs. 242K forecast
U.S. crude oil inventories up by 0.6M barrels vs. 3.4M forecast
FOMC member Kaplan: U.S. near full employment, 2% growth this year
Kaplan: Fed should act sooner rather than later
Treasury Secretary Mnuchin: Gov’t policies to have limited impact in 2017
Mnuchin in no rush to start investigation on Chinese currency manipulation

Dollar bears were at it again as the “Trumphoria” started to fade on U.S. Treasury Secretary Mnuchin’s remarks. Pound bulls, on the other hand, continued to charge.
Major Events:

Treasury Secretary Mnuchin’s testimony – Promises, promises… The Trump administration seemed less aggressive than usual with their plans to push for higher infrastructure spending and brand China as a currency manipulator, as Treasury Secretary Steven Mnuchin also hinted that the Donald’s “phenomenal” tax reform is still in the balance.

Recall that Trump’s campaign promises included 4% GDP growth but Mnuchin downplayed this by saying that government policies would have a limited impact this year and that the economy could expand by 3% at best. He acknowledged the need for tax cuts and banking deregulation but added a much-needed dose of reality in saying that these aren’t likely to come into play until 2018.

“Regardless of when they go in place, this won’t really impact the economy until next year when you begin to see changes in behavior,” Mnuchin explained. “And it will take a couple years to get growth.”

FOMC voting member Kaplan’s speech – Fed official Kaplan dropped a couple of hawkish beats in his testimony, citing that the U.S. central bank should tighten sooner rather than later. He assessed that the economy is nearing full employment and is poised for 2% growth this year, nothing dollar traders haven’t heard before. He added that monetary policy accommodation can be removed gradually and patiently as well.
Major Market Movers:

GBP – Sterling held its ground against its peers once more, even though there were no major reports out of the U.K. economy.

GBP/USD popped up from 1.2452 to a high of 1.2562, GBP/JPY is up from a low of 140.08 to 141.60, EUR/GBP slid from .8467 to the .8430 area, and GBP/AUD recovered from 1.6155 to 1.6280.

USD – The Greenback’s legs gave way as dollar traders warmed up to the idea that the Trump administration might not be as aggressive in terms of economic reforms as initially hoped.

EUR/USD rose from 1.0546 to a high of 1.0596, USD/CHF dipped from 1.0098 to a low of 1.0053, USD/JPY is down from 113.20 to a low of 112.56, and USD/CAD dropped back to 1.3100.
Watch Out For:

9:30 am GMT: U.K. BBA mortgage approvals
European Open Briefing

European Open Briefing

Daily Forex Fundamentals || Feb 24 17 05:49 GMT

Global Markets:

Asian stock markets: Nikkei down 0.50 %, Shanghai Composite lost 0.30 %, Hang Seng declined 0.35 %, ASX 200 fell 0.85 %
Commodities: Gold at $1250 (-0.05 %), Silver at $18.20 (+0.35 %), WTI Oil at $54.50 (+0.10 %), Brent Oil at $56.65 (+0.10 %)
Rates: US 10-year yield at 2.38, UK 10-year yield at 1.15, German 10-year yield at 0.23
News & Data:

PBoC Fixes USDCNY Reference Rate At 6.8655 (prev fix 6.8695 prev close 6.8735)
RBA Governor Lowe: There Are More Effective Ways to Stimulate Demand Than to Cut Rates Now
Asian shares slip from 1-1/2-year high, Trump's yuan remarks in focus – RTRS
Exclusive: Trump calls Chinese 'grand champions' of currency manipulation – RTRS
Oil slips as stockpiles rise for seventh week – RTRS
Markets Update:
It was fairly quiet in Asia, with no major data releases or events. The US Dollar strengthened slightly initially, but then reversed gains later in the session. AUD/USD climbed back above 0.77, but is still struggling to gather momentum. Heavy resistance is seen ahead of the 0.7780 level, while support can be expected 0.7650.
The outlook for USD/JPY remains bearish, with resistance now noted at 113.20 and 113.60. The pair has bounced off 112.55 support yesterday, but it looks vulnerable. Should it break below it, a retest of 111.60 seems likely.
Upcoming Events:

13:30 GMT – Canadian CPI
15:00 GMT – US New Home Sales
15:00 GMT – US Michigan Consumer Confidence
Asian Session Forex Recap – Feb. 24, 2017

Asian Session Forex Recap – Feb. 24, 2017

RBA’s Lowe: It’s “reasonable” to expect constant interest rates throughout the year

Ho hum. It was a directionless trading session for forex traders, as a lack of fresh catalysts inspired market players to cherry pick their positions.
Major Events:

RBA’s Lowe gives another speech – The Reserve Bank of Australia (RBA) top boss is at it again! In his discussion with the parliament’s standing Committee on Economics, Lowe supported speculations that the central bank is done easing for a while.

Apparently, he and his gang aren’t too interested in boosting employment in the short-term but making households more vulnerable in the medium term. See, they believe that further cuts could push household debt to “dangerous levels.” Unlike most central banks that only target employment and inflation numbers, the RBA has a mandate to ensure “the general welfare of the Australian people.”

Lowe even asked:

“Household debt is at record levels. Is it really in the national interest to get a little bit more employment in the short term at the expense of encouraging that fragility?”

For now, Lowe says it’s “reasonable” for markets to price in constant interest rates throughout the year even though “there are clearly scenarios where they’d go up and there are scenarios where they’d go down.” He then capped it with “I think it would be good if people focused on other things rather than quarter percent movements in interest rates.”
Market Movers:

AUD – With Philip Lowe all but saying that rate cuts are out of the table this year, the Aussie managed to sneak in a pip or two from its counterparts.

AUD/USD is back at .7715 after dipping to .7699, AUD/NZD is up to 1.0686 after falling to 1.0660, and AUD/JPY capped the session at 86.99 after slipping to 86.88.
Watch Out For:

10:30 am GMT U.K. BBA mortgage approvals (41.9K expected, 43.2K previous)
China overtakes France and America as Germany's most crucial trading partner

China overtakes France and America as Germany's most crucial trading partner

China overtakes France and America as Germany's most crucial trading partner

Last year China for the first time managed to become Germany's most crucial trading partner, thus overtaking the USA, which fell back to third place behind France, as data disclosed on Friday.

German imports from as well as exports to China inched up to 170 billion euros the previous year, as Federal Statistics Office figures reviewed by Reuters revealed.

The development will be most likely appreciated by the German government, which has already made it an objective to safeguard global free trade after American President Donald Trump threatened to impose tariffs on imports, while his top adviser on trade dared to accuse Germany of exploiting a weak euro to spur exports.

German Vice Chancellor Sigmar Gabriel has suggested that the EU needs to refocus its economic policy toward Asia, if the Trump administration keeps pursuing protectionism.

Additionally, neighboring France remained the second-most crucial business partner with a combined trade volume of about 167 billion euros. America came in third with approximately 165 billion euros.
Last edited:
RBS Plans to Cut $2.5 Billion of Costs After Ninth Straight Loss

RBS Plans to Cut $2.5 Billion of Costs After Ninth Straight Loss

Royal Bank of Scotland Group Plc, Britain’s largest taxpayer-owned bank, laid out a plan to cut costs by 2 billion pounds ($2.5 billion) over the next four years as it posted its ninth straight annual loss.

The net loss widened to 6.96 billion pounds in 2016 from 1.98 billion pounds a year earlier, the Edinburgh-based lender said in a statement on Friday. Excluding conduct charges and restructuring costs, operating profit was 3.67 billion pounds, topping the 3.1 billion-pound average estimate of seven analysts compiled by Bloomberg News.

Chief Executive Officer Ross McEwan remains mired in past scandals almost a decade after RBS required a 45.5 billion-pound bailout from U.K. taxpayers, as he battles to draw a line under surging charges tied to regulatory probes and the aborted sale of the bank’s Williams & Glyn consumer unit. RBS has now accumulated more than 58 billion pounds of losses since 2009.

“The bottom line loss we have reported today is, of course, disappointing,” McEwan said in an e-mailed statement. “These costs are a stark reminder of what happens to a bank when things go wrong and you lose focus on the customer, as this bank did before the financial crisis.”

It was a foregone conclusion that RBS would post its third-largest loss in the past decade, after it set aside 3.8 billion pounds in recent weeks for a U.S. investigation into the sale of mortgage-backed securities, while pledging to pay to boost competitors in the U.K. commercial banking market to meet European Union demands tied to its bailout.

Fore more on RBS’s plans to scrap the sale of Williams & Glyn, click here

McEwan is pushing to eliminate operating expenses as he shrinks RBS, a one-time global titan, to a domestic retail and commercial lender. He’s redoubling his efforts after his plan to lower the bank’s cost-to-income ratio, a key measure of profitability, to below 50 percent by 2020 was blown off-course after the Bank of England cut interest rates last year.

The firm’s core Tier 1 capital ratio, a measure of financial strength, fell to 13.4 percent from 15 percent at the end of September. While McEwan has previously pledged to return capital to investors through dividends or share buybacks above 13 percent, he’s also said he needs to return the lender to profitability, pass stress tests from the Bank of England, close its U.S. mortgage securities probes and reach a deal with the EU over Williams & Glyn.
Asian shares slip from 1-1/2-year high, Trump's yuan remarks in focus

Asian shares slip from 1-1/2-year high, Trump's yuan remarks in focus


Asian shares took a breather on Friday, slipping from 1-1/2-year highs as material shares were hit by sudden falls in copper and other commodity prices while investors assessed Washington's stance on tax and currency policies.

U.S. President Donald Trump called China "grand champions" of currency manipulation, doing little to raise confidence on trade relations between the world's two biggest economies.

Markets appeared to take his comments in stride, as they were made just hours after his new Treasury secretary pledged a more methodical approach to analyzing Beijing's foreign exchange practices.

"With Mnuchin officially sworn in, from now on, I suspect most comments on foreign exchange policies come from him. And he has said a strong dollar is in U.S. interests," said Shuji Shirota, head of macroeconomic strategy group in Tokyo at HSBC Securities.

The offshore yuan stood little changed at 6.8545 per dollar CNH=D4. The yuan was emerging Asia's worst performer last year, even as Beijing tried to stem its fall, sliding around 6.6 percent in its biggest drop in over 20 years onshore.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.5 percent, giving back part of this week's gains, though it is likely to log its fifth straight week of gains.

Australian material shares were the biggest drag as they were spooked by big falls in the price of copper CMCU3, iron ore DCIOv1 and other commodities.

Hong Kong's Hang Seng .HSI dropped 0.5 percent while China's mainland shares .SSEC fell 0.4 percent.

Japan's yen-sensitive Nikkei .N225 was off 0.2 percent.

The MSCI world equity index .MIWD00000PUS, which tracks shares in 46 nations, rose 0.15 percent to 446.69 on Thursday, touching a record peak at 447.67 at one point and extending its gains so far this year to almost six percent.

Leading the gains were emerging markets .MSCIEF, which have rallied more than 10 percent since the start of the year, thanks to signs of a pick-up in global economic activity and a rebound in commodity prices.

On Wall Street, the Dow .DJI managed to notch a record high for a tenth straight session, the longest streak since 1987. The streak of gains is the longest for the index since March 2013.

Traders have bet on tax cuts, less regulation and more infrastructure spending from Trump and the Republican-controlled Congress to bolster the U.S. economy.

"There are strong expectations on tax cuts in the U.S. markets. On the other hand, the chance of a Fed rate hike in March seems limited, which is also helping shares," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

U.S. Treasury Secretary Steven Mnuchin on Thursday laid out an ambitious schedule to enact tax relief for the middle class and businesses by August, but added the Trump administration was still studying a border tax.

As Trump has promised a "phenomenal" plan by early March to cut business taxes, many investors expect more clarity when he delivers a speech to Congress on Tuesday.

Wednesday's Federal Reserve minutes, which showed that there was less urgency among voting members to raise interest rates, have helped to drive down U.S. Treasury yields and the dollar.
The yield on 10-year U.S. Treasuries hit a two-week low of 2.372 percent US10YT=RR.

The dollar slipped to 112.55 yen JPY=, also a two-week low, on Thursday and last stood at 112.85 yen.

The euro fetched $1.0574 EUR=, off Wednesday's six-week low of $1.0494.

Oil prices held firm near the top of their trading ranges, thanks to high compliance among the OPEC countries to curb output.
Exclusive: Trump says Republican border tax could boost U.S. jobs

Exclusive: Trump says Republican border tax could boost U.S. jobs


U.S. President Donald Trump on Thursday spoke positively about a border adjustment tax being pushed by Republicans in Congress as a way to boost exports, but he did not specifically endorse the proposal.

Trump, who has lashed out at U.S. companies for moving operations and jobs to countries such as Mexico, had previously sent mixed signals on the proposal at the heart of a sweeping Republican plan to overhaul the tax code.

"It could lead to a lot more jobs in the United States," Trump told Reuters in an interview, using his most approving language to date on the proposal.

Trump sent conflicting signals about his position on the border adjustment tax in separate media interviews in January, saying in one interview that it was "too complicated" and in another that it was still on the table.

The proposal has divided American businesses. Critics say the planned 20 percent tax on imports could be passed along in higher prices to consumers, including manufacturers that rely on imported goods to make their products.

Some critics have warned of a potential global trade war which would sharply curtail U.S. and world economic growth.

Advocates say U.S. exporters will gain as their revenues will be excluded from federal taxes. They say the tax on imports will encourage domestic production and cause the already strong dollar to rise, offsetting upward pressure on import prices.


Trump has also called for a 35-percent border tax on U.S. companies that move jobs abroad and import products back into the U.S. market. It has been unclear in the past if those references referred to the border adjustment proposal.

"I certainly support a form of tax on the border," he told Reuters on Thursday. "What is going to happen is companies are going to come back here, they're going to build their factories and they're going to create a lot of jobs and there's no tax."

White House spokesman Sean Spicer also came to the defense of border adjustment on Thursday, disputing the claim that it could lead to higher consumer prices. "That benefits our economy, it helps American workers, it grows the manufacturing base," Spicer told reporters at a White House briefing.

The Mexican peso weakened slightly against the U.S. dollar immediately after Trump's comments and was last trading at 19.68 per dollar. Earlier on Thursday, the Mexican currency hit its strongest level since Trump's Nov. 8 election victory.

Stocks of retailers, which could be hurt by border adjustment, weakened on Wall Street after Trump's remarks. The S&P 500 retailing index ended down 1 percent. Shares of Wal-Mart Stores slipped and closed down 0.6 percent. Trump said his administration will tackle tax reform legislation after dealing with Obamacare, the health insurance system that his fellow Republicans have bashed since it was put in place in 2010 by his predecessor, President Barack Obama.

Earlier on Thursday, Treasury Secretary Steven Mnuchin told CNBC the Trump administration aimed to formulate a tax plan with support from the Republican-controlled House of Representatives and Senate and pass it before August.


Lawmakers and corporate lobbyists say the border adjustment tax could die in Congress, potentially jeopardizing the prospects for tax reform, mainly because of opposition from a handful of Senate Republicans.

But experts say Trump's endorsement could change the political climate. "If Trump supports it, that makes it considerably more likely," Harvard Business School professor Mihir Desai told Reuters.
Trump's comments were followed by dueling statements from lobbying groups.

A statement from the pro-border adjustment American Made Coalition said the White House was "sending its strongest signals yet that it’s leaning toward supporting the House blueprint with border adjustability."

The Americans for Affordable Products coalition that opposes the border adjustment tax issued a statement saying Trump’s remarks were "consistent with what he’s already said" and that it was "impossible" to know if they were specific to any individual legislative policy.

Trump spoke to Reuters after meeting with more than 20 chief executives of major U.S. companies to discuss ways to return manufacturing jobs to the United States, one of the linchpins of his 2016 presidential campaign.

Many CEOs of large multinationals back the border adjustment tax. The chiefs of 16 companies, including Boeing Co, Caterpillar Inc and General Electric Co, sent a letter to Congress on Tuesday urging support for it.

A border adjustment has emerged as the most controversial segment of the House Republican tax reform blueprint. Under the House plan, it would raise more than $1 trillion in revenues to help pay for a corporate tax cut.
Exclusive: Trump calls Chinese 'grand champions' of currency manipulation

Exclusive: Trump calls Chinese 'grand champions' of currency manipulation

President Donald Trump declared China the "grand champions" of currency manipulation on Thursday, just hours after his new Treasury secretary pledged a more methodical approach to analyzing Beijing's foreign exchange practices.

In an exclusive interview with Reuters, Trump said he has not "held back" in his assessment that China manipulates its yuan currency, despite not acting on a campaign promise to declare it a currency manipulator on his first day in office.

"Well they, I think they're grand champions at manipulation of currency. So I haven't held back," Trump said. "We'll see what happens."

During his presidential campaign Trump frequently accused China of keeping its currency artificially low against the dollar to make Chinese exports cheaper, "stealing" American manufacturing jobs.

But Treasury Secretary Stephen Mnuchin told CNBC on Thursday he was not ready to pass judgment on China's currency practices.

Asked if the U.S. Treasury was planning to name China a currency manipulator any time soon, Mnuchin said he would follow its normal process of analyzing the currency practices of major U.S. trading partners.

The Treasury is required to publish a report on these practices on April 15 and Oct. 15 each year.

"We have a process within Treasury where we go through and look at currency manipulation across the board. We'll go through that process. We'll do that as we have in the past," Mnuchin said in his first televised interview since formally taking over the department last week. "We're not making any judgments until we go continue that process."

A formal declaration that China or any other country manipulates its currency requires the U.S. Treasury to seek negotiations to resolve the situation, a process that could end in punitive tariffs on the offender's goods.

The U.S. Treasury designated Taiwan and South Korea as currency manipulators in 1988, the year that Congress enacted the currency review law. China was the last country to get the designation, in 1994.
The current situation is complicated because China's central bank has spent billions of dollars in foreign exchange reserves in the past year to prop up the yuan to counter capital outflows.

The International Monetary Fund said last year that the yuan's value was broadly in line with its economic fundamentals. The U.S. Treasury also said in its last currency report in October that its view of China's external imbalances had improved somewhat.

Trump's pronouncements about the yuan could also complicate matters for Mnuchin as he prepares for his first meeting next month with his Group of 20 finance minister counterparts in Baden Baden, Germany.
Oil clings to gains as stockpiles rise for seventh week

Oil clings to gains as stockpiles rise for seventh week


Oil prices held gains on Friday on data showing U.S. stockpiles rose for a seventh straight week but at a pace that was well below expectations, and news of oil being sold out of storage in Southeast Asia.

U.S. West Texas Intermediate CLc1 was unchanged at $54.45 a barrel by 0526 GMT (12:26 a.m. ET), pulling back from early losses. WTI was on track for a weekly gain of about 2 percent, which would be its biggest so far this year.

Brent crude LCOc1 was up 3 cents at $56.61 and was on track for a weekly gain of about 1.4 percent.

U.S. crude inventories USOILC=ECI rose by 564,000 barrels in the week to Feb. 17, up for a seventh week, although below analysts' expectations for an increase of 3.5 million barrels, the Energy Information Administration (EIA) said. [EIA/S]

The Organization of the Petroleum Exporting Countries and producers including Russia have pledged to cut production by around 1.8 million barrels per day (bpd) to tackle a global glut that has kept prices depressed since 2014.

While OPEC appears to be sticking to its deal, producers that were not part of the deal, particularly U.S. shale drillers, have increased output, driving the growth in inventories in the United States, the world's biggest oil consumer.

"Current oil prices are neither sustainable for OPEC or the industry," AB Bernstein said in a note on Friday. "As such, inventories will have to fall, which we expect will be clearer in the spring after the seasonal build."

Signs are emerging that this is happening in Asia with traders selling oil held in tankers anchored off Malaysia, Singapore and Indonesia, Reuters reported on Friday.

More than 12 million barrels of oil has been taken out of storage in tankers berthed off Southeast Asian countries this month, shipping data in Thomson Reuters Eikon shows.
Traders have been benefiting from a market feature known as contango where prices for later delivery are higher than those for immediate dispatch. But the future premium is falling and future prices may slip below spot prices, known as backwardation.

"Tightening fundamentals will push the crude market into backwardation in the coming months," BMI Research said in a note. This "will benefit participants in the paper market but hamper the profits of oil traders who are unable to exploit the cash and carry arbitrage."
Traders drain pricey U.S. oil storage as OPEC deal bites

Traders drain pricey U.S. oil storage as OPEC deal bites


Traders are turning the spigots to drain the priciest storage tanks holding U.S. crude stockpiles as strengthening markets make it unprofitable to store for future sale and cuts in global production open export opportunities.

That could signal the beginning of the end for a two-year trade play that came about during an international price war and global oil glut. It is also what the world's largest oil exporters wanted to see when they agreed last year to work together in a historic supply cut to end the glut.

From Houston through Louisiana to floating storage in the Gulf of Mexico, traders are starting to ship crude out of inventories as the rising price of oil for near-term delivery erodes the profits to be had by holding onto oil for later sale.

To be sure, shipments from storage have so far made only a small dent in record U.S. crude inventories. But if prompt oil prices continue to strengthen, more storage will empty out.

"Right now, traders aren't incentivized (to store)," said Sandy Fielden, director of oil and products research at Morningstar.

"It won't all stampede out of the gate, but inventory levels will come down. What will happen is that some of it will go to refineries, but a fair amount will be exported too."

To make money by holding crude, the spread between oil prices for future months needs to be wide enough to cover the cost of leasing tank space and borrowing the money to buy the fuel to fill it. For the last two years, U.S. traders have rushed to that opportunity as those price spreads widened.

Since November, when the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers agreed to cut output, the spread, or discount of prompt barrels to later supplies known as a contango, between the front and second month U.S. benchmark CLc1-CLc2 crude price has narrowed to as little as 26 cents from 95 cents a barrel. That is no longer enough to cover the more expensive storage options, traders said.

In the Houston area, traders that took out storage at the height of capacity issues in 2015 at around $1.20 a barrel are finding it no longer economical.

In the Louisiana Offshore Oil Port (LOOP), the only deep-water U.S. oil port and a major conduit for the country’s crude oil imports, drawdowns have been reflected in the costs of storing oil, traders said.

The futures contract for oil storage there LOSc1 has fallen to around 40 cents per barrel, down about half in a month and still double the difference between front- and second-month crude prices.

One of the most expensive storage options is to hold oil on tankers at sea. During the massive build up in inventory through 2015 and 2016, even some of that was profitable.

Floating storage is now falling. In the U.S. Gulf, crude in offshore tankers fell to 26 million barrels last week from 35 million barrels a month ago, according to data provider ClipperData.

Not all of that crude was considered to be held in floating storage. Some of it may have simply been waiting to discharge.

The largest, and typically cheapest, U.S. storage facility is in Cushing, Oklahoma, which is also the delivery point for West Texas Intermediate (WTI) futures contract CLc1, one of the world's two most important benchmarks for oil prices.Even at Cushing, market participants are emptying storage. Stocks have fallen on average by more than 600,000 barrels per week since the end of 2016, and analysts expect another two to three million barrels to empty out in March.

The going rate for putting oil in tanks in Cushing is around 35-50 cents per barrel per month, though some secured cheaper space still considered profitable before the oil price rout began in mid-2014.

Even as traders sell from the pricier storage tanks, total inventories in the United States have reached a record level. [EIA/S]
That build up is likely due to high imports that were booked before the OPEC production cut, traders and analysts said. It takes around six week for crude from the Middle East to make its way to the United States, and further shipments should fall in coming weeks.

"There is unlikely to be much more of a tail to the increased flow from the Middle East into the U.S.," Paul Horsnell, global head of commodities research at Standard Chartered, said in a note.

Stocks have also built because refineries are piling up inventories during their seasonal maintenance periods. As they return ahead of summer demand season, inventory builds should reverse.

Record exports of U.S. crude in February and March, particularly to Asia, are also expected to boost prices and encourage shipments from storage.

Exports from the United States hit a record high of 1.22 million barrels per day (bpd) last week and domestic production rose to above 9 million bpd, the highest since April, the U.S. Energy Administration Agency said.

"With those two together, the U.S. is becoming an export juggernaut," said John Kilduff, partner at New York energy hedge fund Again Capital.
Oil sold out of tanker storage in Asia as market slowly tightens

Oil sold out of tanker storage in Asia as market slowly tightens


Traders are selling oil held in tankers anchored off Malaysia, Singapore and Indonesia in a sign that the production cut led by OPEC is starting to have the desired effect of drawing down bloated inventories.

Yet in the short-term, the crude released from tankers will weigh on markets and possibly undermine OPEC's goal of achieving a balanced market by mid-2017.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers outside the group, including Russia, announced late last year that they would cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017, looking to drain a glut that pulled down prices from over $100 per barrel in 2014 to around $56.50 currently LCOc1.

"OPEC's strategy is targeting inventories – given the scale of the overhang, the market won't rebalance in six months – we expect an extension into (the second half of 2017)," said Energy Aspects analyst Virendra Chauhan.

As OPEC's cuts start to leave some demand unmet, a hefty 6.8 million barrels of crude has been taken out of tanker storage from Linggi, off Malaysia's west coast, in February, shipping data in Thomson Reuters Eikon shows.

An additional 4.1 million barrels and another 1.2 million barrels have been taken out of storage on tankers in Singaporean and Indonesian waters, the data shows.


In the short-term, the flood of crude from floating storage will add to supplies coming into Asia from as far away as the Americas and Europe.

In the longer-term, however, clearing oil out of inventories like tankers is part of OPEC's goal to rebalance markets.

"Inventories will continue to decline driven by the combination of production cuts and the strong demand growth," U.S. bank Goldman Sachs said this week in a note to clients, adding that it expected Brent prices to rise slightly in the second quarter, to $59 per barrel.

Traders charter supertankers like Very Large Crude Carriers (VLCC), in which they can store up to 2 million barrels of oil for extended periods of time, when a market situation known as contango is in place, with prices for later delivery higher than those for immediate dispatch.

The January to June 2017 contango in the forward curve was almost $3 per barrel, compared to a June premium of under half a dollar now.

With prices further out into 2018 and beyond even falling, the curve has fallen into what traders call backwardation, which makes it unattractive to store oil on chartered tankers.

"Dancing contango is now not a profitable thing to do, so we've sold out," said one oil trading manager who, until recently, held crude stored in a tanker. He spoke on condition of anonymity due to the commercial sensitivity of the issue.
China's coal imports from North Korea ease after sanctions

China's coal imports from North Korea ease after sanctions


China's coal imports from North Korea eased last month after new U.N. Security Council sanctions curbing the isolated country's sales of the fuel abroad came into effect, as Russia, Mongolia, Australia and Indonesia raised shipments, data showed on Friday.

January imports eased 13 percent from a year earlier to 1.45 million tonnes. They were down 28 percent from December,

January's volume accounted for almost 20 percent of the latest U.N. annual sales quota of 7.5 million tonnes or $400.9 million, whichever is smaller, on North Korea's biggest export.

The imports came before Beijing's decision on Saturday to ban coal shipments entirely after Pyongyang tested an intermediate-range ballistic missile in its first direct challenge to the international community since U.S. President Donald Trump took office.

North Korea was China's biggest supplier last year of high-grade anthracite coal, used mainly by the country's steel mills, with imports reaching 22.4 million tonnes, up 14.5 percent compared with 2015.

Analysts have said steel mills will likely be forced to buy more expensive domestic anthracite or seek alternatives further afield from Russia or Australia, driving up costs.

Coal shipments from Mongolia [COA-MNCN-IMP] rose 154 percent to 3.12 million tonnes, the fourth highest on record, as traders took advantage of its significant price advantage over Australian coal.
Australian Newcastle spot prices [GCLNWCPFBMc1] fell sharply from about $93 per ton at the end of December to about $83 by the end of January.
Iran says oil prices over $55 per barrel harmful for OPEC: Fars

Iran says oil prices over $55 per barrel harmful for OPEC: Fars


Iran said on Thursday an increase in oil prices to more than $55 per barrel was not in the interest of OPEC as it would lead to a rise in output by non-OPEC producers, the semi-official Fars news agency reported.

"If oil prices specifically surge over $55 or $60 per barrel, non-OPEC producers will increase their crude production to benefit the most from the price hike," Iranian Oil Minister Bijan Zanganeh was quoted by Fars as saying.

"OPEC is determined to reduce its production to help manage the market."

Benchmark Brent crude oil was trading up $1.18 a barrel at $57.02 as of 1429 GMT.

The Organization of the Petroleum Exporting Countries agreed on Nov. 30 to cut output by 1.2 million barrels per day for the first six months of 2017, in addition to 558,000 bpd of cuts pledged by independent producers such as Russia and Oman.

OPEC Secretary-General Mohammad Barkindo said that January data showed conformity from participating OPEC nations with output curbs had been above 90 percent and oil inventories would decline further this year.

Iran was exempted from the production cut as Tehran argued its output should be allowed to recover after the lifting of international sanctions in January last year.
Morning brief for February 24

Morning brief for February 24

Markets shifted their focus from the European continent to the US economy overnight. The Wall Street Journal published its interview with newly confirmed US Treasury Secretary Steve Mnuchin. He sounded quite measured and careful. The Secretary passed up the opportunity of accusing China of its currency manipulation, revealed Treasury Department’s intentions to lift economic growth, underlined that he and his colleagues are looking seriously at the Administration’s fiscal plan that includes border adjustment tax (it suggests taxing imports and subsidizing exports through a cash flow/VAT-style tax). This tax is widely expected to be a tailwind for the US dollar. Also, we got the Fed President Lockhart comments on the future path of the Fed’s rate hike. He elucidated the meaning of Fed’s “fairly soon” saying that it means that hike can appear in next 3 meeting. Well, it certainly conflicts with the views of the bulls; it is actually not soon enough. Maybe, we should consider incanting the Fed’s “we expect rate hikes fairly soon” and then, it finally raises its rates? Well, let’s give it a try.

EUR/USD edged up to 1.0580 in the course of the past sessions mainly because of the falling yields on the US Treasury notes,

USD/JPY spiked to 112.95 in the Tokyo morning but then failed to consolidate its position in that area having slid to 112.70. The economic calendar for this currency pair is very light today. We don’t expect significant swings/troughs from prices.

AUD/USD rose to 0.7720 in the Asian session. Earlier this morning, the RBA Governor Philip Lowe reiterated messages on monetary policy that further rate cuts are ruled out the bank had been sending before, but for the present time, they are consistent with country’s economic growth. Also, he didn’t dare to say that Aussie is overvalued. If commodity prices continue their rally, the Governor would expect a further appreciation of AUD.

Kiwi spiked to 0.7245 (61.8% Fibo retracement level from September 7 high) overnight but failed to advance further. In the Asian session, it slipped some points against its US counterpart. There won’t be any surprising news for the pair later today, enjoy sideways movement.

USD/CAD tumbled to 1.3080 due to a substantial upsurge in the oil prices. Brent oil futures rose to $56.60 thanks to high compliance among the OPEC members with the output cut agreement signed in November 2016. Today’s focus will on Canada’s consumer price report to be released at 15:30 MT time (a drop in the price component of IVEY PMI hints at a bit disappointing data).

GBP/USD was the major gainer overnight. The British pound jumped to 1.2560 mainly on the greenback’s weakness. The further upsurge will be complicated. The sterling will have to clear the resistance at 1.2610 to reassure the market participants in its strength. The only data release from the UK was the CBI retail sales that posted a quite upbringing headline. Another market trigger – the Scottish government discussing another Scottish independence referendum that might take place next year, after actual Brexit. Now, the politicians believe that they have all chance to win it.
Forex - Dollar little changed, Fed minutes still weigh

Forex - Dollar little changed, Fed minutes still weigh


Forex - Dollar little changed, Fed minutes still weigh
Forex16 minutes ago (Feb 24, 2017 02:18AM ET)

Dollar holds steady vs. rivals amid rate hike uncertainty Dollar holds steady vs. rivals amid rate hike uncertainty

Investing.com - The dollar was little changed against other major currencies on Friday, as the minutes of the Federal Reserve’s latest policy meeting continued to weigh on the greenback, as well as Thursday’s downbeat jobless claims report.

EUR/USD was steady at 1.0587.

Late Wednesday, the minutes of the Fed’s January policy meeting showed that policymakers thought it may be appropriate to raise interest rates again "fairly soon."

However, the minutes also revealed the central bank’s uncertainty over the lack of clarity of the Trump administration's economic program, dampening demand for the greenback.

The dollar was also weighed by a report by the U.S. Department of Labor on Thursday showing that initial jobless claims increased by 6,000 to 244,000 last week. Analysts had expected jobless claims to rise by 2,000 to 241,000.

GBP/USD eased 0.09% to trade at 1.2546, off a two-week high of 1.2571 hit overnight.

Elsewhere, USD/JPY rose 0.23% to 112.87, after falling to a two-week low of 112.53 on Thursday.

USD/CAD was almost unchanged art 1.3101, as investors eyed the release of Canadian inflation data, due later in the day.

Market participants were also awaiting reports on U.S. new home sales and consumer sentiment, expected later Friday.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 100.94.
Dollar poised for weekly losses after Fed minutes

Dollar poised for weekly losses after Fed minutes


TOKYO (Reuters) - The dollar clawed back some ground on Friday after skidding to a two-week low against the yen, but was still on track for weekly losses after the Federal Reserve meeting minutes disappointed dollar bulls.

The greenback inched 0.1 percent higher to 112.76 yen but was just off a two-week low of 112.55 plumbed overnight and down 0.2 percent for the week.

The dollar failed to shrug off pressure from the Fed minutes released on Wednesday, which were more dovish than some market participants had expected.

"Market participants were still digesting the FOMC minutes from the January meeting, and there seems to be two different camps in the reading of those minutes - whether they introduced a more hawkish tone, or a more dovish tone - and it appears the doves are winning that battle," said Bill Northey, chief investment officer for the private client group at U.S. Bank in Helena, Montana.

Also weighing on the dollar were new U.S. Treasury Secretary Steven Mnuchin's remarks in his first televised interviews since taking office last week. He told Fox Business Network that any policy steps the Trump administration takes would likely have a limited impact this year.

Mnuchin told CNBC that he wanted to see tax reform passed before Congress' August recess, a basic timeline that fit many investors' expectations but disappointed those hoping for more rapid reform and fuller details.

"It's been one month now since Trump became U.S. president, and we're still waiting to see what he can do, particularly on tax reform," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

"In the meantime, no one wants to bid up to buy dollars, and it all depends on U.S. interest rates, which are still soft-ish, so the dollar is still sagging," he added.

The yield on 10-year U.S. Treasuries fell to a two-week low of 2.372 percent (US10YT=RR) overnight and was last at 2.375 percent, below Thursday's U.S. close of 2.388 percent.

The euro was off this week's lows but remained pressured by fears about anti-European Union rhetoric from French presidential candidate Marine Le Pen ahead of the first round of French elections on April 23, with the second round to come in May.

The euro was on track to shed 0.2 percent for the week against its U.S. counterpart, but was steady on the day at $1.0582 , well off this week's trough of $1.0494 hit on Wednesday, which was its lowest since Jan. 11.

The euro's struggle gave sterling a tailwind. The pound stood at $1.2550 , up 1.1 percent for the week.

"We would not be surprised to see GBP/USD retrace to 1.25 but breakouts after long periods of consolidation tend to have continuation," wrote Kathy Lien, managing director at BK Asset Management.

The dollar index, which tracks the U.S. unit against a basket of six major peers, edged down 0.1 percent to 100.970 (DXY), nearly flat for the week.
Forex - Dollar gains in Asia on Mnuchin tax views, investors mull Fed

Forex - Dollar gains in Asia on Mnuchin tax views, investors mull Fed


The dollar made some gains in Asia oN Friday after comments from Treasury Secretary Steven Mnuchin that the Trump administration wants a tax cut plan passed by Congress by August and as investors weighed the prospects of the Fed hiking rates in March.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.12% to 101.07. USD/JPY changed hands at 112.84, up 0.20%, while AUD/USD traded at 0.7705, down 0.12%.

Overnight, the dollar pushed lower against other major currencies on Thursday, after the release of downnbeat U.S. jobless claims data and as the minutes of the Federal Reserve’s most recent policy meeting failed to deliver a clear message on the pace of future rate hikes.

The U.S. Department of Labor said initial jobless claims increased by 6,000 to 244,000 in the week ending February 18 from the previous week’s revised total of 238,000. Analysts had expected jobless claims to rise by 2,000 to 241,000 last week. Late Wednesday, the minutes of the Fed’s January policy meeting showed that policymakers thought it may be appropriate to raise interest rates again "fairly soon."

However, the minutes also revealed the central bank’s uncertainty over the lack of clarity of the Trump administration's economic program, which limited the greenback’s gains. The minutes came after Fed Chair Janet Yellen said last week that a rate increase would be appropriate at one of the Fed’s forthcoming meetings.
Pound makes strong gains as dollar retreats

Pound makes strong gains as dollar retreats


The U.S. dollar sunk lower against major currencies on Thursday, as uncertainty surrounding the progress of US. tax reform and public spending continues to mount while weaker-than-expected jobless claims data weighed on the greenback.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, sunk 0.3% to 101.01, and is on course for its second day of losses.

The dollar made a rocky start to the session plagued by Wednesday’s Fed minutes, which revealed a reluctance among some Fed members’ to support a raise interest rates, as they await further details on President Trump’s economic plans in order to assess how Trump’s policies would impact economic growth.

The latest U.S. labour market data, added to the greenback’s woes, after the U.S. Department of Labor said initial jobless claims increased by 6,000 to 244,000 in the week ending February 18 from the previous week’s revised total of 238,000 compared to analysts’ estimates of a rise by 2,000 to 241,000 last week.

Meanwhile, New U.S. Treasury Secretary Steven Mnuchin comments failed to inspire a recovery in the greenback, after he told CNBC that he wanted to see tax reform passed before Congress' August recess.

Elsewhere, sterling hit a 1 week-high against the dollar, buoyed by a modest recovery in UK retail sales in February relative to a steeper fall in retail sales in January, according to the latest Confederation of British Industry’s quarterly Distributive Trades Survey.

GBP/USD climbed more than 0.7% to $1.255 at 12:45 EDT 5:45 GMT.

EUR/USD added to the previous session gains to trade at $1.058 up 0.2%, despite a poll showing far-right candidate Le Pen was marginally (10 points) behind conservative Francois Fillon but 22 points behind centrist Emmanuel Macron in the potential second-round run-offs.

USD/JPY traded lower at $112.75, down 0.49% while USD/CAD slipped 0.43% to $1.312.
Dollar dips as U.S. policy worries, Fed minutes weigh

Dollar dips as U.S. policy worries, Fed minutes weigh


NEW YORK (Reuters) - The U.S. dollar fell against a basket of major currencies on Thursday on a perceived lack of progress on U.S. tax reform and public spending, while Wednesday's more dovish-than-expected Federal Reserve meeting minutes continued to weigh on the greenback.

The dollar fell as much as 0.5 percent against the yen to a six-day low of 112.66 yen , while the euro rose as much as 0.3 percent against the dollar to $1.0587 .

Concerns over the shape of politics on both sides of the Atlantic helped the safe-haven yen, with anti-EU French presidential candidate Marine Le Pen's campaign and U.S. President Donald Trump's policy timeline stoking demand for the Japanese currency.

New U.S. Treasury Secretary Steven Mnuchin told Fox Business Network that any policy steps the Trump administration takes would likely have a limited impact this year and told CNBC that he wanted to see tax reform passed before Congress' August recess.

That was in line with comments by other politicians over the past month, but seemed to some investors to dial back Trump's own recent promises.

"While it remains very difficult to pin down a fixed schedule for Trump tax reforms, it now appears anything phenomenal will now be delayed," said Adam Myers, a currency strategist with Commonwealth Bank in London.

"Such policy drag should, at some stage, open up stock markets to disappointment and limit dollar strength."

Concerns over the potential risk of a Le Pen victory in France pushed the euro lower against currencies other than the dollar, including the yen, said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.

The euro was higher against the dollar, despite a poll showing Le Pen was only 10 points behind conservative Francois Fillon but 22 points behind centrist Emmanuel Macron in the potential second-round run-offs..

Wednesday's Fed minutes, which showed that there was less urgency among voting members to raise interest rates, also kept the dollar depressed against its major rivals.

"People were expecting slightly more hawkish minutes yesterday," Scalone of TJM Brokerage said.

Fed funds futures on Thursday implied traders saw just a 22.1 percent probability that the Fed would hike rates in March, up from Wednesday's 17.7 percent probability but still low, data from CME Group's FedWatch showed.

The dollar index (DXY), which measures the greenback against a basket of six major currencies, was last down 0.2 percent at 101.020.
Bitcoin rises for 10th day in a row, closes in on all-time high

Bitcoin rises for 10th day in a row, closes in on all-time high


Prices of web-based digital currency Bitcoin rallied for the tenth day in a row on Thursday, closing in on its all-time high set back in 2013.

Bitcoin rose to a daily peak of $1,152.08 on the New York-based itBit exchange at one point, before falling back to $1,148.00 by 9:50AM ET (14:50GMT), up about 1.9% on the day.

Other big exchanges such as Bitfinex, Kraken and BitStamp also showed the cryptocurrency at around the $1,150-level early Thursday.

According to the CoinDesk Bitcoin Price Index, which averages prices from the major exchanges, prices of the crypto-currency climbed 2%, to $1,144.87.

Its all-time of $1,165.89 was set in November 2013.

Buyers have been piling into bitcoin in anticipation the U.S. Securities and Exchange Commission will approve at least one of the three proposed bitcoin-focused exchange-traded funds by the March 11 deadline.

Prices of the virtual currency are up more than 17% so far this year.

Bitcoin is digital cash and is not backed by a government or central bank to regulate or issue it. It can be used to purchase goods and services from stores and online retailers.