SWISS FRANC FALLS SHARPLY AFTER DISAPPOINTING GDP NUMBERS
The price of crude was under pressure today after data from the Energy Information Administration (EIA) showed increased inventories. In the past week, inventories in the United States rose by 3.57 million barrels to reach 450 million barrels. This was higher than the 0.769 million that traders were expecting but lower than the previous week’s data of 4.85 million barrels. On the same day, data from API showed that inventories rose to 3.45 million barrels. The pressure was also because of Russian President Putin’s statement that he was comfortable with the current oil production levels. This sets a clash between Russia and Saudi at the G20 summit and in the next week’s summit in Vienna. The price of WTI dropped below $50 a barrel for the first time since October 2017.
Yesterday, the Swiss Franc rose sharply against the USD as Jerome Powell made a speech. The USD/CHF pair declined by almost one percentage point to reach an intraday low of 0.9917. Today, the Swiss Franc lost against the USD after data from the Bureau of statistics showed that economic growth in the second quarter disappointed. In the quarter, the economy rose by 2.4%, which was lower than the expected 2.9% and the second quarter’s growth of 3.5%. On a quarterly basis, the economy contracted by 0.7%. This was lower than the 0.4% growth that traders were expecting.
The sterling declined sharply against the USD as Theresa May addressed a committee of the House of Commons. May was defending the deal she made with Brussels. In the statement, she did not rule out the possibility of a no-Brexit deal. If it happens, she said that the country should start preparing early because of the negative implications that could happen. A government paper released yesterday showed that the economy will suffer a 9% drop in the GDP if the country exits without a deal. A banks’ stress test report showed that the country’s banks will do fine in case of a no-Brexit deal. In her testimony today, she reiterated that the deal with Brussels was the best one possible. On economic data, the mortgage lending in October rose to £4.12 billion, which was higher than the expected £3.50 billion. The number of mortgage approvals increased by 67.09K compared with the expected 64.55K.
After yesterday’s sharp rise, the euro declined against the USD after a series of data from the EU. The business and consumer survey for November showed an improvement to 109.5. This was higher than the expected 109.0. The sentiment in the services and industrial sector was also better than expected. In Germany, the unemployment rate dropped to 5.0% from the previous 5.1% as the unemployment change improved to 16K. This was better than the consensus estimate of 10. In Spain, the CPI rose by an annualized rate of 1.7%, which was lower than the estimated 2.0%. In France, the Q3 GDP rose by an annualized rate of 1.4%. In Germany, the CPI increased by 2.3% in November. This was lower than the estimated 2.4%.
World markets rose today, following in the footsteps of the US markets yesterday after the dovish statement by Fed’s Jerome Powell. In the speech to the Economic Club of New York, he said that the country’s interest rates were nearing the neutral level. After the speech, US markets soared with the Dow gaining by 500 points. In Europe, the DAX gained by 30 points while the Stoxx and FTSE gained by 20 and 45 points respectively. In Asia, Chinese stocks ended the day lower with the Chinese A50 index shedding 104 points. US futures pointed to a lower open, with the Dow shedding 60 points. Data released by the Labor Department showed that the continuing jobless claims increased to 1,710K, which was higher than the expected 1,664K while the initial jobless claims increased to 234K. This was higher than the expected 221K. After reaching 202K in September, the initial jobless claims have been increasing. On the positive side, the personal income rose by 0.5%, which was better than the expected 0.4%. Similarly, personal spending increased by 0.6%, which is better than the expected by 0.4%.
Volatility in the USD/CHF pair increased as shown in the 30-minute chart below. After falling sharply yesterday, the pair rose today after the weak GDP numbers from Switzerland. It reached an intraday high of 0.9965. The upward trend could continue because the weak economic data will likely continue making the case for lower interest rates by the SNB. The current price is moving along the upper band of the Bollinger Bands. It is also above the 30-day EMA. Therefore, the pair could continue moving up until it reaches the parity level of 1.
The price of US crude oil dropped below $50 for the first time since October last year. This was a continuation of a downward rally that started in the first week of October. The XTI/USD major moving averages on the hourly chart show that the pair could continue moving lower. The downward momentum is confirmed by the MACD and RSI as shown in the chart below. The next support level for the pair could be 45. However, in the coming days, traders should continue following the news as it may help determine the direction of the pair.
After surging yesterday, the EUR/USD pair fell today after mixed data from Europe. The pair declined to an intraday low of 1.1348. In the past two months, the pair has continued to decline as investors waited for another rate hike by the Fed. Its double moving averages are trading within a narrow range, while the volatility as measured by the Average True Range (ATR) is increasing. The pair will likely remain in this range as traders receive more clarification from the Fed.