Crude oil rises as OPEC continues with supply cuts
The sterling rose today after the European Union accepted Theresa May’s proposal for an extension of Article 50. A number of countries like France have signaled that the UK could remain being member of the EU for as long as a year. This is a blow to Theresa May, who wanted a short extension as her party begins to negotiate with Jeremy Corbyn’s Labor party. The delay also means that the ongoing uncertainties over Brexit could continue for an extended period. This uncertainty could limit the amount of investments in the UK. Meanwhile, the economic data released today were a bit better than earlier expected. In the first quarter, the GDP expanded by 2.0%, which was better than the expected 1.7%. It was also higher than the first quarter’s 1.5%. The manufacturing production in February rose by an annualized rate of 0.9%, which was 70 basis points higher than the expectations. The industrial production rose by 0.1%, which was also better than the expected drop of 0.1%. On the other hand, the country’s trade deficit widened to £14.11 billion.
The price of crude oil rose slightly after OPEC released its monthly report. The report showed that the cartel’s supply cuts and the involuntary production in Venezuela and Iran had pushed the oil market into a deficit. The supply is now below the demand they had expected. In March, the production by OPEC declined by more than 500K barrels a day. They now stand at more than 30 million barrels a day. The cuts were led by Saudi Arabia. Today, the EIA will release the weekly crude stocks data, which are expected to show an increase of 2.294 million barrels.
The euro was little moved after the ECB released its interest rates decision. As expected, the bank left the base lending rate unchanged at 0%. The deposit facility was left at minus 0.40% while the marginal lending facility was also left unchanged at 0.25%. On the next interest rates hike, the bank said that it will leave rates unchanged until the end of this year. In addition, the accompanying statement did not include any points regarding the Targeted Longer-term Refinancing Operations (TLTROs). The TLTROs provide financing to credit organizations for periods of up to four years.
The USD index declined today ahead of the minutes of the past monetary policy meeting. The minutes will be released at 19:00 (GMT). The minutes come a day after the International Monetary Fund (IMF) lowered the estimates for global growth. The organization expects the global economy to grow by 3.3% this year. This was lower than January’s forecast of 3.5% and October’s forecast of 3.7%. Meanwhile, data from the ONS showed that consumer prices rose by an annualized rate of 1.9%, which was better than the expected 1.8%. The core CPI, rose by an annualized rate of 2.0%, which was lower than the expected 2.1%.
The price of Brent crude rose slightly to a high of $70.56, approaching closer to the 5-month high of $71.15. On the four-hour chart, the price is above the 25-day and 50-day Exponential Moving Averages (EMA). The RSI has remained closer to the overbought levels while the Bulls Power has eased a bit. The price could see some major swings immediately after the EIA releases its inventory numbers.
The GBP/USD pair moved up today after the EU announced an extension of Article 50. On the hourly chart, the pair’s price is slightly above the 25-day and 50-day moving averages. The Average True Range indicator has moved to the lowest level since Monday. The signal line of the stochastic indicator has remained slightly below the overbought level. In the short term, the pair could move to test the important resistance level of 1.3130.
The EUR/USD was little moved after the ECB decision and after the US CPI numbers. The pair is trading at 1.1273, which is slightly lower than the day’s high of 1.1286. On the chart below, you can see that the price is along the middle line of the Bollinger Bands. The money flow index has moved slightly higher while the Average True Range has moved slightly higher. The pair will likely continue to see some major movements in the US session today.