Crude Oil on Bearish Trend

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On Monday, the European currency kept its ground in the moments following the German IFO (The Institute for Economic Research) release, with the EUR/USD major gravitating around the 1.1030/40 point. The German indicator surprised the market, coming in at: Expectations 103.8 versus the estimated 102.4, Current Assessment at 112.6 versus the estimated 113.5 and Business Climate 108.2 versus an estimation of 107.8. Although the readings were above par, the major’s trend lacked any obvious influence. Despite yesterday’s good news, demand for the EUR remains subdued, as investors continue to look forward at a possible ECB (European Central Bank) easing – which will most likely happen in December. Today’s interest is the FOMC (Federal Open Market Committee) meeting, the market participants factoring a hawkish message from Chair Yellen.

Yesterday brought forward the UK GDP release from the ONS (Office for National Statistic) which showed a 0.5% qoq (quarter-on-quarter) economic expansion; good from one perspective – not flat, nor negative – but under the estimated 0.6% growth, and also under the previous 0.7% figure. The yoy (year-on-year) GDP for the 3rd quarter came as well under its estimated value, at +2.3%. Several economic sectors compressed during the period and it can be mentioned here: the construction sector (which went down 2.2%), the manufacturing sector (down with 0.3%) and the overall production growth paced subdued to 0.3% (previously 0.7%). The service sector went up with 0.7%, marking the biggest rise since 2014’s Q4; the 2nd quarter’s figure was also +0.7%, but the first 3 month of the year register only 0.3% growth.

From the US side we find out that the durable goods orders have declined wit 1.2% in September, the global demand pressure taking its toll on America’s economic expansion. Also, the previous figure for the same indicator has been revised lower to 2.3%. After a downward revision to 1.6% in August, demand for non-military capital goods (aircrafts excluded) posted -0.3%. Shipments of non-defense capital goods (aircrafts excluded) – the GDP flagship – rose 0.5% after a 0.8% reduction in August. At a glance, we can see the results are not coming around the ones investors are used to and to top that, previous period’s figure have been downwardly revised. This setback has been reflected in the 10-years US treasury yield, with over 2 basis points decay over the course of Tuesday, at 2.032%.

With speculation over a growing US oil reserve last week and an official announce from the US government about an oil sell from the Strategic Petroleum Reserve of millions of barrels (starting from 2018 to 2025), crude prices sunk even deeper. The WTI (West Texas Intermediate) barrel closed the session yesterday at $42.57/br. – fresh 2-month low.

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