Oil rallies after inventory draw; GBPUSD hits 7-month high

Summary:

• Oil.WTI jumps above $57 after large inventory draw

• GBPUSD moves above $1.33 to hit 7-month high

• USDCAD retests trendline after inflation data

• DE30: Cerberus said to back Deutsche Bank - Commerzbank merger

• Major Swiss bank to offer cryptocurrency services

The weekly crude oil inventories have shown the largest drop in 7 months, and added more fuel to the recovery rally following Monday’s large declines. Compared to an expected build of 2.8M and a prior reading of +3.7M today’s number is clearly a positive beat for the price of crude. Last night’s API saw a short, sharp move higher after an unexpected drop of 4.2M, but today’s more widely viewed figure has outdone that and provided a further boost to the market. Oil.WTI jumped on last night’s API drawdown and extended the rally after this afternoon’s EIA inventory release. Price is now back above the $57 handle and up by almost 200 ticks, or $2, in less than 24 hours.

There’s been further appreciation seen in the pound today with the currency rising above the $1.33 mark to trade at its highest level since last July. The UK government released a report saying that border checks will cost business 13 billion pounds a year and that companies are not prepared for hard Brexit but PM May promised the Parliament a vote on extension of negotiations if her deal is rejected again.

The main economic data of the afternoon comes from Canada with the latest look at price pressure in the country showing little by the way of surprises. The headline CPI for January came in as expected at 1.4% Y/Y, marking a sizable drop on the 2.0% seen last time out. Looking at the M/M figures, there was a little bit of softness with an increase of 0.1% less than the +0.2% expected and up from -0.1% previously. On the whole there’s little to go off here really, with a small miss in the M/M reading, which by nature is quite volatile and unpredictable not enough to provide any real suggestions of a change in the inflationary environment. USDCAD is once more testing a rising trendline going back to the start of last year.

It’s been a bit of a mixed day on the whole for stocks with some early weakness but they are bouncing back in recent trade and have recovered the bulk of the losses at the time of writing.  Cerberus Capital Management, the US private equity firm, changed its stance towards the German banks it owns. Asset manager now backs merger of the Deutsche Bank (DBK.DE) and Commerzbank (CBK.DE) in the nearby future. Such a shift is said to be result of declining stock prices of both lenders and concern whether Deutsche Bank can make a turnaround on its own. News come from Handelsblatt report and so far neither Cerberus, nor representatives of the German banks confirmed it.

The cryptocurrency market has been trading quite calm as major cryptocurrencies have been moving rather flat so far. According to CoinMarketCap, the capitalization of the whole cryptocurrency market stands around the $131 billion handle whereas the largest virtual currency Bitcoin accounts for roughly 51.9% of this value. Major Swiss bank Julius Baer has teamed up with SEBA Crypto AG, which is the crypto-focused Swiss bank, “to provide its clients with access to a range of new digital asset services”, according to the bank’s post published yesterday on its Twitter profile. As a result, the large Swiss bank has become another major financial institution which wants to enter into the cryptocurrency market. Let us recall that such entities as Nasdaq and Fidelity have announced their plans related to cryptos in recent months. As we could see, some major financial companies do not seem to be discouraged to cryptos despite huge falls of cryptocurrency prices seen in the previous months.