DOE draw sees Oil close to 2018 peak; USD drops on fall in PPI

Summary:

• Oil back near $80 after large DOE draw

• Surprise drop in US PPI sends USD lower

• DE30 little changed after Juncker delivered State of the Union speech

• More losses for cryptocurrencies

• Big Thursday for currencies. Will CBRT save the Turkish Lira

 

The latest DOE inventory release has shown yet another large drawdown, marking the 4th consecutive weekly drop. The headline figure of -5.3M is similar to last week’s -4.3M print and shows that US stockpiles have dropped substantially in the past fortnight. The reading was in between the consensus forecast from analysts who expected a drop of 1.3M and last night’s API inventories which showed a mammoth drop of 8.6M. The choppy trade seen following the release is not too surprising when you look at the components of the report, which while probably still seen as positive for crude overall, does contain a few points that take the edge off of it. The bigger picture for Oil is becoming increasingly interesting after strong recent gains have seen the price return to its 2018 peak around 80.50.

 

The most recent inflation figures from the US have come in lower than forecast and seen the USD come under a little bit of selling pressure. The PPI M/M for August unexpectedly declined by 0.1% after a consensus forecast called for a rise of 0.2% following a flat print (0.0%) previously. This is the first negative reading in M/M terms since last December’s data and only the 4th in the last 2 years. The US dollar was trading mixed on the day ahead of the release but it has since fallen back lower with the USDJPY dropping to make new lows.

 

Indices are mixed on the day by the European close with the DE30 making an early attempt to push higher but running into resistance just north of the 1200 mark. Jean-Claude Juncker delivered State of the Union speech today. European Commission President hailed the European growth in the after-crisis period and strong jobs growth. Moreover, topics concerning the European election standards and procedures as well as role of euro in the World were also raised. Juncker said that the coast guard force will be strengthened to help tackle the migration crisis. While no direct references were made to the US, the politician said that he is no supporter of “selfish unilateralism” and he is in favor of multilateralism.

 

The losses in the cryptocurrency space are continuing today with Ethereum experiencing a large drop of more than 8%. Dash and Litecoin are also deep in the red although Bitcoin is little changed on the day and Ripple is an odd bright spot, up by a little over 2%. One of the most interesting pieces of news for this area today comes from France where Paris Saint-Germain (PSG), one of the world’s most famous football club, plans to launch its own cryptocurrency with a token offering. The new virtual currency will be created in cooperation with Socios.com (the Malta-based blockchain startup), according to Paris Saint-Germain’s announcement on Tuesday. The coin will be listed on the Socios’ platform.

 

CBRT more important than the ECB, BoE

ECB, Bank of England and the Central Reserve Bank of Turkey are all to decide on rates on Thursday. The first two are expected to make little change with the CBRT decision arguably the standout event of the week. Turkey has started this year’s crisis on emerging markets and there are no signs of turnaround. The reasons of the Turkish crisis extend well beyond interest rates but central bank needs to raise them just to avoid more panic selling. It’s decision is bound to impact other emerging markets as well. The decision will be announced on Thursday, 12:00pm BST.