Oil erases gains as Saudi – Russia deal falls short of expectations

Today’s Economic events

• RBA releases monetary policy meeting minutes
• China M2 money supply y/y 14.0% vs. 13.50%
• New Zealand inflation expectations q/q 1.60% vs. 1.90%
• UK CPI y/y 0.30% vs. 0.30%; Core CPI y/y 1.20% vs. 1.30%
• UK PPI Input m/m -0.70% vs. -1.20%; PPI Output m/m -0.10% vs. -0.20%
• Germany ZEW Economic sentiment 1.0 vs. 0.1
• Eurozone ZEW Economic sentiment 13.6 vs. 10.3
• US Empire state manufacturing index -16.64 vs. -10.0
• Canada manufacturing sales m/m 1.20%vs. 0.80%

Coming up

• New Zealand Global dairy trade index
• US NAHB housing market index
• US TIC Long-term purchases

The markets opened today on a risk-on mode following two days of gains (Friday and Monday) but the risk on environment quickly evaporated into the European trading session. The Yen, which declined steadily to test intraday highs of 114.81¥ was seen trading firmer. At the time of writing, USDJPY is down -0.74% trading at 113.7¥. The equity markets managed to close modestly higher with the Nikkei225 closing with modest gains of 0.20% while the Shanghai Composite rallied 3.32%.

The commodity risk currencies were trading mixed in today’s session. NZDUSD is down -0.94% for the day, trading at $0.658. Yesterday, quarterly retail sales data from New Zealand showed a less than expected increase of 1.20%. The median consensus was expecting retail sales to have risen 1.40%. Core retail sales for the quarter were higher at 1.40%, beating estimates of 1.10%. The Kiwi, however, remained muted and continued to decline steadily after briefly posting an intraday high to $0.6674 as New Zealand Premier John Key expressed surprise that the NZD has not yet declined, tracking the nearly 10% – 20% decline GDT index. New Zealand GDT index declined -7.4% two weeks ago and a fresh set of data is due for release later this evening.

The AUDUSD was, however, unaffected, as the Aussie was seen trading briefly above yesterday’s highs of $0.716, it is now up 0.26% at the time of writing. The RBA’s monetary policy meeting minutes released today showed the RBA’s willingness to wait and assess more economic data. It acknowledged domestic pickup in growth and preferred to watch and see if the labor market was indeed strengthening. Australia’s monthly employment data is due for release on February 18^th.

The European session saw the Euro attempting to make up for the lost ground as the single currency slipped during ECB’s Mario Draghi’s address to the EU Parliament yesterday where he briefly mentioned that the ECB would re-asses its monetary policy at the ECB meeting in March. EURUSD recovered from yesterday’s lows at 1.1128 and managed to open higher in today’s trading. Prices, however, remain sideways as the EURUSD is up 0.12%, trading at $1.116 at the time of writing. Data from Eurozone today included the Eurozone ZEW economic sentiment, which surprised, rising to 13.6 above estimates of 10.3. Equity markets in Europe were trading mixed. The German DAX is down -0.73% and the London FTSE100 is up 0.44%.

The British Pound is seeing a choppy day as prices continue to range. Monthly inflation data from the UK showed a modest pickup in the headline CPI, rising 0.30%, but core CPI grew at a slower pace, rising 1.20%. GBPUSD attempted to test session highs of $1.45 before giving back the gains, currently trading down -0.53% at $1.435

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On the commodity front, Gold prices were seen trending higher in today’s session after prices briefly fell below the $1200 handle in early Asian trading. Gold prices posted an intraday low to $1193 before reversing the losses. A down gap was seen at $1238 on last Friday’s close with the markets opening lower at $1234.52 this Monday. A continued bullish run up in Gold prices could see this gap being filled. Gold is up 0.29% for the day and is now trading at $1213 an ounce.

Crude Oil futures were seen trading volatile in today’s session. WTI Crude Oil rallied strongly off last week’s low near $26.5 and managed to keep the bullish momentum going. In today’s trading, WTI Crude Oil prices touched a high of $31.4 before quickly easing back. The gains in Crude Oil prices came about as Russia, Venezuela, Qatar and Saudi Arabia agreed to freeze Oil output at January levels. Oil prices fell as the sub-headlines show that Iran and Iraq have not yet joined the agreement. The oil production freeze is said to be conditional, subject to other Oil producing nations agreeing to freeze production levels well.

In the NY trading session, US Empire state manufacturing index released showed a stronger than expect fall in the index, to -16.64, well below the -10.0 estimates which continue to point to a slowdown in the manufacturing sector. Canadian manufacturing sales released at the same time shows a robust monthly increase of 1.20%, beating estimates of 0.80%. USDCAD is down -0.16% lower, trading at 1.38C$.