Oil, Silver, ECB – Markets this week (Apr 18 – 22)

Apr 22, 12:33 pm
ECB Meeting December

It was a volatile week from the start as the markets opened to the news of failed Doha talks, which sent the markets opening sharply lower. However, by mid-day on Monday Oil was well on its path to a strong recovery. Precious metals were also posting wild swings this week as silver and gold posted strong gains but then pulled back lower. Oil prices gained supported led by disruptions to oil supply from Kuwait which faced strikes for nearly three days before the situation was resolved. Meanwhile, Russia announced that it was going to increase Oil production in 2016. With the weekly crude oil inventories rising, Oil prices shrugged off all the data and continued trading above the $42 a barrel mark.

Here’s a quick recap of this week’s economic events that shaped the markets.

Pound sterling weathers weak economic data

Economic data from the UK this week was broadly weaker. After inflation data released earlier during the month gave hopes of a turnaround, retail sales numbers released this week disappointed. Retail sales fell 1.30% in March, missing forecasts of a 0.10% decline while February’s retail sales were revised higher from -0.40% to -0.50%. On a year over year basis, UK’s retail sales grew at a pace of 2.70%, compared to a revised 3.60% previously. Excluding auto fuel, retail sales gained 180% but slower than the previous period of 3.70%. This week also saw the monthly jobs report being released. ONS said that the jobless claims increased 6.7k against estimates of a dip of -10k. Last month’s numbers were revised sharply from -18k to -9.3k. The unemployment rate was steady however at 5.10% while average earnings edged higher, rising 2.20% excluding bonuses while gaining 1.80%, including bonuses for the three months ending February.

“It’s too soon to be certain, but with unemployment up for the first time since mid-2015 – and employment seeing its slowest rise since that period – it’s possible that recent improvements in the labor market may be easing off.” ~ Office for National Statistics

ECB: No fireworks this time

The ECB’s meeting this week was a largely non-event. The euro rallied after the minimum bid rate was released and tested highs of close to 1.139 but soon fell back sharply as Draghi reiterated that the current monetary policy would remain accommodative until the inflation mandate of 2.0% was achieved. He said that that central bank had a wide range of tools to tackle inflation and stressed the important to remain patience. When questioned about Germany’s disagreement to the ECB’s policies, Draghi said that the ECB was an independent body which operates within the frameworks of the law and that it was not answerable to politicians or governments. Earlier on Friday, the ECB’s survey of professional forecasters showed that inflation in the euro area would remain weak at 0.30% into 2016 and would see a pick up only in 2017. The latest quarterly forecasts were revised sharply lower from January’s survey results. EURUSD continued to move lower into Friday’s session.

“..there is limited scope to the upside…this is a well-known trick Draghi uses when the euro reaches or nears uncomfortably high levels, and acts as a signal that the ECB is not prepared to easily tolerate a further appreciation of EUR.” ~ Commerzbank

Silver prices on track for strong weekly close

Although gold prices rallied this week, it was clearly silver prices which outperformed. Rising to an 11-month high at $17.5, silver prices posted strong gains this week following weeks of ranging price action in comparison. The gains in silver came on Thursday ahead of the ECB’s meeting which sent both Gold and silver higher. However, towards Thursday’s close, gold prices pulled back sharply and continued to trade weaker into Friday’s session, whereas silver prices managed to hold on to the gains. At the time of writing, silver was trading at $17 per troy ounce.

It is a very volatile market at the moment, and it will stay this way for a while,” ~ Vyanne Lai, a commodity analyst at National Australia Bank

Economic events this week

  • Canada foreign securities purchases 15.9 billion vs. 7.52 billion
  • RBA releases monetary policy meeting minutes
  • Germany ZEW economic sentiment 11.2 vs. 8.2
  • Eurozone ZEW economic sentiment 21.5 vs. 13.9
  • US building permits 1.09 million vs. 1.20 million
  • US housing starts 1.09 million vs. 1.17 million
  • UK average earnings index 3m/y 1.80% vs. 2.10%
  • UK unemployment rate 5.10% vs. 5.10%
  • Canada wholesale sales m/m -2.20% vs. -0.40%
  • US crude oil inventories 2.1 million vs. 2.2 million
  • UK retail sales m/m -1.30% vs. -0.10%
  • ECB leaves minimum bid rate unchanged at zero percent
  • US Philly Fed manufacturing index -1.6 vs. 8.1
  • US weekly unemployment claims 247k vs. 265k
  • Eurozone flash manufacturing PMI 51.5 vs. 51.8; flash services PMI 53.2 vs. 53.3
  • Canada core CPI m/m 0.70% vs. -0.40%; CPI m/m 0.60% vs. 0.30%
  • Canada core retail sales m/m 0.20% vs. -0.80%; retail sales m/m 0.40% vs. -0.80%
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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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