Summary: FX took a breather, enthralled by the Oil price crash in spectacular fashion to unprecedented levels. A futures contract for US crude prices dropped more than 100%, turning negative for the first time in history. West Texas Intermediate (WTI) crude for May delivery plunged to settle at negative -$37.63 per barrel, unprecedented levels. Which meant that producers would pay traders to take the oil off their hands. The collapse in demand was directly due to the coronavirus pandemic which has enforced strict lockdown in the country, creating a supply glut. Brent Crude Oil prices, the international benchmark, settled 7.4% lower at USD 28.60. Markets went into risk-off mode. Wall Street stocks declined in the dying minutes of trade. The DOW settled at 23,630 from 24,267, down 2.59%. The S&P 500 declined 1.96% to 2,820. The Dollar Index (USD/DXY), a favoured gauge of the USD’s value against a basket of 6 foreign currencies rose 0.17% to 99.966 (99.716). Against the oil sensitive Canadian Loonie, the Dollar jumped to finish at 1.4135 from 1.4010, up 1.1%. The Euro was modestly lower at 1.0865 (1.0875) after the latest Commitment of Traders report (week ended 14 April) saw speculators accumulate more of the shared currency, taking it to the largest levels since 2018. Sterling slipped 0.3% to 1.2433 (1.2507) as the UK’s Covid-19 death toll climbed by 449 in the last 24 hours. The Australian Dollar ended 0.34% lower at 0.6335 (0.6365) ahead of today’s release of the RBA’s latest Meeting Minutes. USD/JPY rose to 107.70 from 107.55 on the broadly stronger Greenback. Global bond yields were mixed. The benchmark US 10-year bond yield slipped to 0.61% from 0.64%. Germany’s 10-Year Bund yield climbed to -0.45% from -0.48%. The People’s Bank of China trimmed its interest rate (Loan Prime Rate) by 20 basis points to 3.85%.
Data released yesterday saw New Zealand’s Q1 CPI climb 0.8% from 0.5% in Q4, beating forecasts at 0.4%. Germanys Producer Price Index fell to -0.8%, lower than expectations of -0.7%. The Eurozone’s Trade Surplus rose to +EUR 40.2 billion, bettering forecasts at +36.3 billion.
On the Lookout: It was all about the oil price crash as US markets closed and Asia began its day. In early Sydney trade, US President Trump said the Oil producers need to do more by the market in terms of production cuts. OPEC nations and Russia agreed to cut production by 9.7 million barrels/day beginning in May, which markets considered not enough. Saudi Arabia said it was considering applying the oil production cuts as soon as possible. Trump said the US is looking into putting 75 million barrels into its strategic petroleum reserves.
In the FX space, today’s main event is the release of the RBA’s latest Monetary Policy Meeting Minutes (11.30 am Sydney) which will be followed by a speech from Governor Philip Lowe in Sydney (3 pm Sydney). Lowe is scheduled to deliver a speech entitled: “Economic and Financial Update” at the RBA headquarters in Sydney.
Other date released today sees Swiss Trade Balance, UK Employment data: Claimant Count Change (number of people claiming unemployment related benefits), Average Earnings Index (Wages), and Unemployment Rate. Germany reports its ZEW Economic Sentiment Index. This is followed by the Eurozone ZEW Economic Sentiment Index. Canada reports its Headline and Core CPI data for March.
US Existing Home Sales round up the days data releases.
Trading Perspective: The souring risk sentiment that resulted from the oil price crash saw a modest lift to the US Dollar against most of its rivals. The latest Commitment of Traders/CFTC report (week ended 14 March (which covers the long Easter weekend) saw large speculators and hedge funds sell Dollars, mostly to buy Euros. Speculative net Euro long bets increased by 7,000 lots to total +EUR 86,617, levels not seen since 2018 according to Saxo Bank. Elsewhere the movements were light against the other currencies. Apart from the Euro, speculators were short USD/long currency in GBP, JPY, CHF and MXN. Against the AUD, NZD, CAD speculators were long of USD, short of these currencies. This should result in modest USD support.