Market Review for February 27, 2018 - Technical Analysis, Afghanistan

Financial Market Review for February 27 2018 The Kiwi Dollar took a tumble this morning after the release of disappointing trade figures, as focus shifts to Jerome Powell’s first semi-annual testimony that could include a green light to anticipated rate hike next month.

Economic data released through the Asian session this morning was on the lighter side, with key stats limited to New Zealand’s January trade figures.

Year-on-year, the trade deficit widened from a revised N$2,840m to N$3,220m, which was worse than forecasted narrowing to N$2,711m, while month-on-month, the trade balance shifted from a revised N$640m surplus to a N$566m deficit, the largest deficit for a January month since 2007.

StatsNZ reported that exports increased by 9.5% to N$4.31b year-on-year, while imports jumped by 17% to N$4.87bn, with both hitting new highs for January months. While the jump in imports stemmed from an increase in imports of a wide range of goods, the jump in exports was attributed to milk powder, butter and cheese exports, which accounted for N$101m of the N$373m increase in exports in January. The increase came in spite of an N$21m fall in the export of milk powder, butter and cheese to China, the first fall since Nov-16.

The Kiwi Dollar moved from $0.73169 to $0.73019 upon release of the data, which was certainly Kiwi Dollar negative, with the Kiwi Dollar down 0.30% to $0.7281 at the time of writing.

Elsewhere, the Aussie Dollar was down 0.10% to $0.7847, while the Yen was down just 0.02% to ¥106.95 against the Dollar.

In the equity markets, the Monday rally in the U.S markets supported another move this morning, with the Nikkei up 1.24%, and the Hang Seng and ASX200 up 0.14% and 0.31% respectively, while the CSI300 bucked the trend, down 1.08% at the time of writing.

The moves come ahead of Jerome Powell’s first semi-annual testimony to Congress as the FED Chair, with last week’s Semi-Annual Monetary Policy Report having eased any fear that Powell and the FED will take a more aggressive rate path for the year.

Following a quiet Monday, stats out of the Eurozone this morning include prelim February inflation figures out of Spain and Germany, together with France’s jobseekers total. We will expect the inflation figures to provide some direction, with ECB President Draghi having poured cold water on any expectations of a pickup in inflation near-term on Monday afternoon.

Less influential stats that may also play their part, with data on the lighter side, include consumer and business sentiment figures for February, with any major declines likely to test the EUR. Outside of the data, there was some good news on the political front, with Merkel getting the backing of the CDU party on the grand coalition terms on Monday, a vote against likely to have brought Merkel’s political career to an end. The SDP Ballot result is still to come this Sunday, however, so Germany and the EU are not home free just yet.

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Financial Market Review for February 27 2018 For the Italian elections, there’s yet to be any major moves in the EUR in anticipation of Sunday’s election.

The fact that the Eurosceptic 5-Star movement has shifted on its EURO membership views and stated that Italy should not leave the EURO is a positive, with none of the front runners looking to leave the EURO. At the time of writing, the EUR was up 0.06% to $1.2329, with inflation and sentiment figures this afternoon expected to provide some direction ahead of the U.S session.

For the Pound, there are no material economic data scheduled for release this morning, which will leave the markets to look ahead to the British PMI’s speech and continue to ponder on whether the EU negotiators will be willing to give in to the British government’s demands on the transition period and trade. Things are certainly heating up in the UK, with the Labour Party looking to attract the business vote as the Tory Party continues to battle within.

At the time of writing, the Pound was down 0.08% to $1.3967, with the Pound now likely to be in a holding pattern ahead of this week’s private sector PMI figures, Theresa May’s speech and perhaps more importantly the next round of Brexit negotiations.

Across the Pond, it’s a big day for the Dollar, with economic data scheduled for release including January’s durable goods and goods trade balance figures, together with February’s consumer confidence numbers.

While the data will have an influence on the Dollar, with forecasts pointing to a mixed set of stats that are skewed in favour of the Dollar, focus will be on Jerome Powell’s semi-annual testimony.

There’s been plenty of debate and, while recent FOMC member commentary and Friday’s semi-annual Monetary Policy Report suggests that the FED may maintain its current rate path, Powell will need to toe the line if he wants to avoid another equity market sell-off and bounce in U.S Treasury yields and the U.S Dollar.

One would hazard a guess that the direction of the Dollar is of little interest for the FED Chair, while causing a market correction will be something Powell will likely wish to avoid. A green light to a March rate hike is anticipated, with the only question that needs answering being whether the FED will be pencilling in a 4th rate hike in next month’s FOMC meeting.

At the time of writing, the Dollar Spot Index was down 0.04% to 89.815, recovering from an intraday low 89.708, with direction for the day hinged on Powell.

Global shares held firm near three-week highs on Tuesday as U.S. borrowing costs eased ahead of Federal Reserve Chairman Jerome Powell’s awaited first congressional testimony later in the day.

European shares are expected to gain, with spread-betters looking to a higher opening of about 0.4 to 0.5 percent in Britain’s FTSE, France’s Cac and Germany’s Dax Japan’s Nikkei rose 1.1 percent to three-week highs while MSCI’s broadest index of Asia-Pacific shares outside Japan also hit a three-week high before giving up gains on profit-taking in Chinese shares.

On Wall Street, the S&P 500 advanced 1.18 percent on Monday helped by a fall in U.S. bond yields.

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Financial Market Review for February 27 2018 The 10-year U.S. Treasuries yield eased to 2.864 percent, dropping further from its four-year peak of 2.957 percent touched on Feb. 21, driven by month-end buying as well as position adjustments ahead of Powell’s testimony.

Oil prices on Tuesday erased earlier gains as investor concerns about rising U.S. oil output offset signs of stronger demand and faith in the ability of OPEC production curbs to curtail supply.

U.S. West Texas Intermediate (WTI) crude for April delivery CLc1 was down 13 cents, or 0.2 percent, at $63.78 a barrel by 0753 GMT. The contract on Monday rose to its highest since Feb. 6 at $64.24.

Brent crude LCOc1 in London was down 12 cents, or 0.2 percent, at $67.38 a barrel.

Soaring U.S. production is upending global oil markets, coming at a time when other major producers including Russia and members of the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) - have been withholding output to prop up prices LCOc1.

The United States will overtake Russia as the world’s biggest oil producer by 2019 at the latest, the International Energy Agency (IEA) Executive Director Fatih Birol said on Tuesday.

U.S. output was 10.27 million barrels per day (bpd), according to weekly government data released last Thursday, higher than the latest figures for Saudi Arabia, the world’s largest exporter, and just below Russia.

Earlier on Tuesday prices gained, extending multi-day rises for both crude futures. Last week, the U.S. Energy Information Administration (EIA) said there was a surprise draw on oil stockpiles amid a drop in imports and a surge in exports.

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