On the prospects of the oil and the decisions of central banks. Forecast for the week on March 7 – March 11

By | March 6, 2016

Another week stock indices ended growth. In support made by several factors. This is the People’s Bank of China’s decision to reduce by 50 bps the rate on reserve requirements, and the stabilization of oil prices, and strong enough statistics from the US, which is somewhat reduced concerns about the global economic outlook. The strongest growth was shown by Asian markets. Hong Kong HSI added 4.83%, Japan’s Nikkei rose by 4.44%. Against the backdrop of universal positive and expectations of additional stimulus measures by the European Central Bank increased by 3.2% and German DAX30. The US Dow Jones and NASDAQ for the week were added, respectively, 2.29% and 2.16%. More restrained growth, partly due to fears that the US Federal Reserve on the background of optimistic statistics may decide on another rate hike sooner than expected.

In the currency market leaders broke raw AUD / USD and NZD / USD, appreciated by 4.4% and 2.79%. The Aussie jumped to an annual high of 0.7442. Ozzy has received support from the Reserve Bank of Australia’s decision, and against the background of strong GDP data for Q4, as well as on the background of the overall positive sentiment in the commodities market.

Commodities showed positive dynamics. Brent crude oil jumped to a level of 38.90, adding 9.88%. Copper (HG) rose by 7.11%. Positively dynamic and precious metals. Gold (XAU / USD) strengthened by 2.9%. Silver (XAG / USD) ended the week with a score of + 5.53%.

Chart of the week:

aud / usd chart

AUD / USD chart

The economic data of the last week:

  • Monday. The People’s Bank of China’s lowered by 50 bp to 17% rate on reserve requirements
  • Tuesday. US: February, ISM manufacturing index 49.5 higher than the forecast of 48.5
  • Wednesday. Australia. Q4, GDP 3.0% vs. 2.6%
  • Thursday. UK: February, PMI index in the service sector, 52.7 vs. 55.1
  • Friday. US. February, the number of new jobs created outside the agricultural sector 242 thousand vs. 190 thousand.

Forecast for the week on March 7 – March 11

Stock market

This week US economic calendar does not contain meaningful reports. But the European Central Bank next week will publish a decision on monetary policy that can bring about changes in the dynamics of the German index DAX 30 (FDAX). The European regulator has repeatedly hinted at his willingness to go the extra stimulation. Recent data on the index of consumer prices in the euro area were below expectations. On a monthly basis rate in February fell by 0.2%, signaling a return to deflation.

These figures show that the measures taken are still insufficient for the acceleration of inflation. Therefore, the likelihood of the adoption of new measures aimed at easing of monetary policy, increases. Against this background, it is possible the resumption of growth in the German benchmark level of 9980.0 district. Of course, buying at current levels may look fairly risky. But even before the decision the European Central Bank will be published data on industrial production in Germany, as well as a revised report on the rate of growth of the European economy in the 4th quarter. The weaker figures than expected, it may trigger a rollback in the DAX 9600.0 district level that can provide a good opportunity to enter into short-term long positions.

Commodity and raw market

Brent crude oil prices are slowly but surely moving towards its goal. The black gold has tried to gain a foothold above $ 37.00 and the closing weeks he did it for the entire week. Quotes jumped to the level of 38.90. The fundamental backdrop has not changed radically. The market is still waiting for a meeting of OPEC and non-OPEC, whose synergies need to be agreed upon, at least in terms of production freeze. Despite the fact that so far there is no clear information about when and where the meeting will take place, the market is optimistic. And this optimism is fueled by the fact that the major oil-producing regions are ready to look for compromise solutions.

Also, for the benefit of oil quotations and are data on US production volumes. The indicator shows a decrease for 6 consecutive weeks. It is possible that this trend will continue, since the number of working drilling in the country has decreased by 75% from the highs registered in 2014.

Risk factors for the “black gold” in the coming week may make the traditional short-term forecast of the EIA report, and demand and supply of oil on the world market. Signs of growth in net supply may have a short-term pressure on Brent, but this time can be regarded as a good opportunity to enter long positions as before the announcement of results of the meeting of oil-producing countries, oil will gradually move up, aiming at the level of 40.00 dollars per barrel.

Currency market

This week the decision on the monetary policy of the Central Bank will publish just three: the Bank of Canada, the Reserve Bank of New Zealand and the European Central Bank. A possible solution of the latter has been discussed quite a lot, so touch on the Reserve Bank of New Zealand and the Bank of Canada.

New Zealand regulator at the last meeting made it clear that in the future may require a further easing of monetary policy. Also, the Reserve Bank of New Zealand, said the need to reduce the New Zealand dollar. It is worth noting that since the January meeting kiwi rate increased by 5.9%. The pace of economic growth continued to slow, the price pressure increase is only 0.1% (which is far from the target). In addition, despite the stimulus measures that the Chinese government carried out, further cooling the risks of China‘s economy, still remain. And this is an additional reason for concern with respect to the New Zealand economy. Thus, it is possible that the Reserve Bank of New Zealand may decide to mitigate already at the next meeting. But even if this does not happen, quite an important role will be played by comments of officials. Even a little hint of what the current exchange rate of the New Zealand dollar is dangerous for the economy, it may be sufficient that the pair NZD / USD pulled back to the area of ​​the level of 0.6640.

USD / CAD has recently showed a downward movement, largely in response to the dynamics of oil prices, on which pretty much depend on revenue to the state budget (the oil sector generates about 30% of the revenue part). Even after a session of January 20 the market expected a rate cut to the level of 0.25%, but this has not happened. By the current moment the situation has stabilized in the oil market, which may keep the Canadian regulator of additional easing in this time. The limiting factor may also perform the latest inflation data. In January the indicator reached 2.0% in annual terms. Reduced rates can strengthen it. If after a meeting of the rate will be maintained at 0.5%, and the text accompanying statement will contain at least some optimistic notes, the pair USD / CAD may continue to decline in the level of 1.3220 area. An additional condition for the growth of the Canadian dollar could act and preserve positive dynamics of oil prices.

Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.

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