Commodities Week Ahead: Trump & The Oil Market


© Reuters.

By Barani Krishnan

Investing.com – Should Donald Trump tax the import of Saudi and selective foreign crude as a last resort to save U.S. oil producers?

The president threatened on Saturday to “do whatever I have to do” in order “to protect … tens of thousands of energy workers and our great companies”. Just a day ago, he denied any plans to impose tariffs on any imported oil although he acknowledged it “is certainly a tool in the toolbox”.

Trump’s shifting stance is understandable. Within the same 24 hours, both Saudi Arabia and Russia have turned into a joke his tweets from earlier in the week that they were ready for a truce in their oil production-and-price warfare and go back to output cuts with other producers under the OPEC+ alliance that could even include U.S. companies. 

The only saving grace for Trump is that the OPEC video conference that Saudi King Salman agreed to host at the president’s request is still on. But instead of Monday, it might now be held on Friday, an OPEC source told CNN, although there was no certainty that wouldn’t be scrapped too.

It was prospects of that meeting – and Trump’s tweets that the Saudis and Russians were ready to lead the world in cutting 10-15% from global supply — that gave U.S. crude a record 32% gain last week and U.K. an even higher 37%, after 18-years lows for both in the $20s. 

With doom and gloom hanging over the market again, crude prices could see a renewed dive in Asian trading later today. Yet, Trump’s warning that he might use the tax wrench in his toolkit to fix imported barrels could prevent a freefall. The House of Saud will be rather eager to call the president on his bluff — if that’s what it is — though the Kremlin will be keen too. The variance in their interest is based on the fact that the United States imports 95% more Saudi crude than Russian.

The question of whether Trump should go ahead with tariffs leads one into a deeper debate: i.e. Is it right to save U.S. oil producers and hurt the country’s refiners, who depend critically on Saudi and other foreign-sourced crude to make the kind of fuel products that gasoline-friendly American shale oil isn’t capable of?; Will U.S. import taxes be a big enough deal to force the Saudis and Russians to back down from their production-and-price standoff and negotiate a reduced output deal? 

Shale Might Want Trump’s Intervention, Not Broader Industry

From Oklahoma to Texas, the clarion call for federal intervention in the oil market comes from the drillers working the prolific U.S. shale basins that have turned the country into a 13-million barrels-per-day behemoth surpassing even Saudi Arabia and Russia — whose production typically peak at 12 million and 11 million bpd, respectively. 

The U.S. oil industry is now a critical component of the domestic economy, supporting 10.9 million jobs.

The so-called fracking boom has provided gasoline at under $3 per gallon to most Americans for the past six years. It has also given U.S. crude a 3.5-million-barrel export advantage in markets that the Saudis and Russians couldn’t fill because they were too busy cutting output to keep global prices supported — while their American rivals were busy producing and marketing their oil without any care other than profit.

This “drill baby, drill!” phenomenon in U.S. oil can be easily understood once one learns of the industry’s makeup.

Some 91% of the oil wells in the United States  are owned by independent producers who produce 83% of the country’s crude and 90% of its . 

And who are these independents? They can be publicly traded companies or even small family companies. Under U.S. law, an independent energy producer is one who does not have more than $5 million in retail sales of oil and gas in a year or who does not refine more than an average of 75,000 barrels per day of crude oil during a given year. There are about 9,000 independent oil and natural gas producers in the United States. These companies operate in 33 states and the offshore and employ an average of just 12 people.

It explains why it has been virtually impossible all these years to bring such a diverse bunch of wildcatters to a table with a collective-minded group like the Organization of the Petroleum Exporting Countries to strike a deal that will benefit oil producers throughout the world. 

It’s not just the diversity and sheer mass of participants that have stood in the way of an U.S.-OPEC deal. It’s also the American antitrust law that prohibits any kind of coordination and control in oil production. It was a law that interestingly became the basis for the NOPEC – or No Oil Producing and Exporting Cartels Act – that the Trump administration was toying with two years ago, then to sue OPEC for cutting production. 

The antitrust law has been there for years. But it has surfaced in the news lately as talk emerged for the first time of coordinated production cuts by U.S. oil companies fearing  they have no chance of surviving the present crisis unless they do what OPEC has been doing all this while. Two of the companies, Pioneer Natural Resources (NYSE:) Co. and Parsley Energy Inc, have written to regulators in their home state of Texas to ensure that all oil producers contribute to cuts in the state — which produces about 4 million bpd or a third of U.S. output. 

Ryan Sitton, an aggressive and vocal member of the Texas Railroad Commission, which regulates the state’s oil industry, has dived passionately into the shale-saving mission. Sitton has chatted on the phone with OPEC Secretary General Mohammad Barkindo and Russian Energy Minister Alexander Novak, offering a cut of 500,000 bpd on behalf of the TRC. Sitton says he hopes to have a conversation next with Saudi Crown Prince Mohammad bin Salman. He even has the backing of the premier of Canada’s Alberta region for cuts (more on Canada’s role in U.S. energy to follow)

Sitton’s enthusiasm for cuts, however, is not shared by everyone at his TRC office or the wider petroleum industry.

“One commissioner does not speak” for the commission, TRC member Christi Craddick tweeted, adding that “Texas operators will be heard” at a hearing scheduled on April 14.

TRC Chairman Wayne Christian tweeted his initial disagreement too: “If a release or tweet comes from an individual commish, it does not signal consensus from the agency.”

There’s more. On Friday, Trump met with the CEOs of Exxonmobil, Chevron (NYSE:), Occidental Petroleum (NYSE:), Devon Energy (NYSE:), Phillips 66 (NYSE:), Energy Transfer Partners and Continental Resources — all top names in the U.S. energy business. American Petroleum Institute CEO Mike Sommers, who represents the broader industry, was there too. Production cuts were never discussed, say those who attended the meeting. 

The American Petroleum Institute and another trade group, the American Fuel & Petrochemical Manufacturers, have actually counseled the president against intervention.

“We are not seeking any government subsidies or industry-specific intervention to address the recent market downturn at this time,” they argued in a letter to Trump. “Imposing supply constraints, such as quotas, tariffs, or bans on foreign crude oil would exacerbate this already difficult situation, jeopardize the short and long-term competitiveness of our refining sector world-wide, and could jeopardize the benefits Americans experience as a result of our increasing energy dominance.”

Why Taxes Won’t Work for Oil Refiners Or Lead to Output Cuts

And then there’s the refiners. There are 11 main companies behind the 68 refineries in the United States – namely Marathon Petroleum (NYSE:), Valero Energy (NYSE:), Phillips 66, Exxon Mobil (NYSE:), Chevron, PBF Energy, Shell (LON:), BP (LON:), PDV, Koch and Motiva.

None of them ostensibly want taxes on oil imports because such tariffs will hurt a very major component part of their business: refining the heavier, or sour, crude that is typically not produced in the United States and which is critical for making the diesel for trucks and trains, jet kerosene for planes and heavy fuel oil for ships. The decades-old U.S. Gulf Coast refinery system is mainly configured to run on a healthy dose of lower quality heavy crude.

“Any import tax on crude is going to be so harmful to U.S. Gulf Coast refiners,” said John Kilduff, founding partner at New York energy hedge fund Again Capital.  “You’re not going to be lashing out at Saudi Arabia. You’re going to drive up the cost of diesel. It’s the last thing the U.S. economy needs at this time.”

In 2019, the United States imported about 9.1 million bpd of petroleum from nearly 90 countries.

Aside from the Saudi Arabia and the Middle East, the sour and heavy oils are largely found in Venezuela, Mexico and Canada.

Due to U.S. sanctions on Venezuela, not one barrel of oil from that South American country now lands in the United States.

Mexico’s oil output has been in a steady decline for years. About 650,000 barrels of Mexican oil is imported into the United States each day.  

As for Canada, it is the largest provider of crude to the United States, channeling 4.42 million barrels daily, or 49% of U.S. needs. Canada can and wants to do a lot more for America. But it has run out of pipelines used to transport crude to its southern neighbor, limiting production.  

U.S. President Donald Trump on Friday signed a new permission for TransCanada Corp to build the long-delayed Keystone pipeline for imports of Canadian oil, replacing his previous permits in a fresh attempt to get around the blocking of the $8 billion project by a court in Montana. Still, that’s a project literally in the pipeline and won’t immediately solve U.S. needs in the event of a sudden supply crunch.

Which brings us to Saudi imports.  For the week ended Jan 24, U.S. crude oil imports averaged 6.7 million barrels per day and Saudi oil accounted for 407,000 bpd. That’s just about 6% of the total. Yet, it’s a very significant component due to scarcity in the supply of such heavier oils.

As for Russian oil imports, they stood at 18,637 barrels per day in June, just under 5% of the Saudi volumes.

The bottom line is this: The Saudis and Russians can always find markets for their oil. If America wants to tax their oil, they can take their crude elsewhere. Also, if their plan is to destroy U.S. shale and divvy up that 3.5 million barrels held by American exporters  between themselves, there should be no reason for any retreat on their part.

Trump does not have much love for Putin, and he can expect the Russian leader to respond in kind. 

But with Saudi Arabia, the president and his son-in-law Jared Kushner have invested time and energy in developing their relationship with Crown Prince MBS. They have defended the kingdom through the controversial Yemen war and the horrible murder of the journalist Jamal Khashoggi. Washington also provides military protection for the Saudis in the Gulf and has profited as well from Riyadh by selling the kingdom billions of dollars of U.S. arms. Trump seems ready to forsake those ties now if necessary, though the Saudis also seem prepared to do so, to get the market share they want for their oil.

* This is the first of a two-part series that examines the Trump administration’s attempts to save the U.S. oil industry amid the collapse in demand for crude from the coronavirus crisis and the production-and-price war between market titans Saudi Arabia and Russia. Part two will be published tomorrow.



Oil rises more than 1% ahead of OPEC meeting to discuss supply cuts


SINGAPORE (Reuters) – Oil prices rose more than 1% on Thursday ahead of an OPEC meeting in which Saudi Arabia is expected to push the group and its allies including Russia to agree to further output cuts to support the market.

FILE PHOTO: Oil pours out of a spout from Edwin Drake’s original 1859 well that launched the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Photo

Prices were also supported by a lower-than-expected rise in crude oil inventories in the United States, alleviating some concerns of oversupply in the world’s biggest oil consumer.

Brent crude LCOc1 rose by 67 cents, or 1.3%, to $51.80 per barrel by 0436 GMT, while U.S. West Texas Intermediate (WTI) CLc1 was up by 55 cents, or 1.2%, at $47.33 per barrel.

“Crude oil prices were boosted by a broad positive sentiment overnight, and a much lower-than-expected … crude oil inventory data,” said Margaret Yang, a market analyst at CMC Markets.

“(The) market is also anticipating a decent output cut to be carried out by OPEC+, as Covid-19 has brought a significant impact to world’s energy demand. More production curb is needed to shore up crude prices.”

U.S. crude stocks rose modestly last week, less than what analysts had expected, while U.S. oil exports surged to more than 4 million barrels per day (bpd) for the first time since December, suggesting a rise in overseas demand. [EIA/S]

Ministers of the Organization of the Petroleum Exporting Countries (OPEC) hold their formal meeting later on Thursday, followed by a meeting of the broader OPEC+ group including Russia on Friday.

Saudi Arabia and other OPEC members are seeking to win support from Russia to join them in additional oil output cuts to prop up prices that have tumbled by a fifth this year because of the global spread of the coronavirus outbreak.

Russia has instead proposed keeping the existing cuts by the group until the end of the second quarter, sources said.

Saudi Arabia wants extra cuts of 1 million to 1.5 million bpd for the second quarter, and to keep existing cuts of 2.1 million bpd in place until the end of 2020.

“If OPEC+ settles with something in the middle of the Russian request of no change in cuts and the 1.5 million Saudi goal, that might not be enough to keep prices supported here,” said Edward Moya, senior market analyst at broker OANDA.

“OPEC+ needs to send a strong message and anything below 1 million barrels in deeper production cuts will send oil prices sharply lower.” 

Geopolitical tensions in the Middle East also boosted prices. The Saudi-led coalition fighting in Yemen said it had foiled an attack on an oil tanker off Yemen’s coast on the Arabian Sea, the Saudi state news agency SPA reported on Wednesday.

Concerns over demand growth remained, however, with the International Monetary Fund chief saying the global spread of the virus has crushed hopes for stronger economic gains this year.

Reporting by Jessica Jaganathan; Editing by Tom Hogue



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Oil Settles Mixed after Rate Cut, Pressure Ahead of OPEC By Investing.com


© Reuters.

By Barani Krishnan

Investing.com – Oil prices settled mixed on Tuesday after an emergency rate cut by the Federal Reserve was tempered by uncertainties ahead of an OPEC meeting on production cuts.

, the U.S. crude benchmark, settled up 43 cents, or 0.9%, at $47.18 per barrel. WTI rose 4.5% on Monday after a 16% drop last week, its biggest weekly fall since mid-December 2008.

Tuesday’s rebound came after the Federal Reserve cut the key lending rate cut by half a point ahead of its scheduled March 18 meeting. The Fed briefly boosted optimism among investors expecting stimulus for markets battered by the coronavirus epidemic.

, the London-traded global benchmark for crude, however, settled down 4 cents, or 0.07%, at $51.86. It rose 4.5% in the previous session.

Earlier on Tuesday, WTI and Brent rallied about 4% each before falling back on concerns over what OPEC would decide later in the week.

OPEC’s 13 members open their regular twice-yearly meeting on Thursday before a special session on Friday with 10 producing allies led by Russia, who are collectively known as OPEC+.

Saudi Arabia, which dominates the group, is trying to push for an agreement to cut another 1 million barrels per day on top of 2.1 million bpd already agreed in December. Russia, whose cooperation is vital for a cut, hasn’t given the nod to the Saudis.

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Oil Prices Surge Ahead of OPEC+ Meeting; Powell Says Fed Ready to Act By Investing.com


© Reuters.

By Alex Ho

Investing.com – Oil prices surged on Monday in Asia ahead of the much-awaited OPEC+ meeting this week.

U.S. jumped 3.0% to $46.12 by 1:26 AM ET (05:26 GMT). International gained 3.4% to $51.38.

Crude prices took their cue from a nosediving stock market to lose up to 16% this week for the biggest weekly tumble since 2008, before rebounding today.

This week, the EIA will issue its weekly supply-demand report on Wednesday, while OPEC will hold its members-only meeting on Thursday and talks with Russia and other allies on Friday.

Hopes that OPEC+ alliance will deepen output cuts supported oil prices today, as President of Russia Vladimir Putin said Sunday that the country is ready to cooperate to support the world oil market.

Oil prices were also boosted by last Friday’s announcement by Federal Reserve Chair Jay Powell that the central bank was monitoring risks to the U.S. from the coronavirus, and will use “appropriate tools” to support the economy

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Profit rise lifts Peugeot shares ahead of Fiat merger


PARIS (Reuters) – Peugeot maker PSA Group said on Wednesday profitability reached a record high in 2019, results that contrasted with those of many rivals and boosted the group’s shares as it beds down a merger with Italy’s Fiat Chrysler.

The French firm, which also produces cars under the Citroen and DS brands, offset a slump in vehicle sales by selling pricier SUV models, helping to lift revenues. Operating margins grew to a record 8.5% last year thanks to cost savings.

Shares in the carmaker were up 6.6% at 1307 GMT, on course for their best day since October 2018 and making it the top performer on the CAC 40 .FCHI index of major French companies, as worries about the coronavirus market rattled stock markets.

A positive outlook from Moody’s on Wednesday added to PSA’s gains. The rating agency maintained its investment grade view on the company, citing healthy liquidity, and said the merger with Fiat Chrysler (FCA) (FCHA.MI) was positive.

Solid earnings from PSA and FCA earlier this month marked a rare bright spot in the car industry even as they faced hits like others from falling demand in markets like China.

Some rivals such as France’s Renault (RENA.PA) have struggled with sliding revenues and profits as well as lower cash flow generation, leading to ratings downgrades.

FCA, owner of brands like Jeep, did well in North America, which in a combined group with PSA would help balance the company’s portfolio. PSA is more exposed to Europe’s auto market, which it said would shrink 3% this year.

The two companies struck a deal in December to create the world’s No.4 carmaker, to cope better with market turmoil and the cost of making less-polluting vehicles.

FILE PHOTO: The logo of French car manufacturer Peugeot is seen at Brussels Motor Show, Belgium January 9, 2020. REUTERS/Francois Lenoir

PSA boss Carlos Tavares told a news conference the two groups were in good shape and said he did not expect any major regulatory hurdles to the merger, adding it had submitted 14 approval requests to competition authorities out of 24 it needs.

There are no immediate plans to change anything in the large portfolio of brands within the combined group, he added.

“We’ll decide with the people leading those brands what is the best way to go to market … and reduce any cannibalization if there is any,” Tavares said. “I’m more excited by what we can do more of than less of.”

CORONAVIRUS WEIGHS

PSA has trimmed costs in areas such as procuring components as it has integrated its acquisition of Opel and Vauxhall.

New launches of pricier models, including the Citroen C5 Aircross, helped lift revenues by a higher-than-expected 1% to 74.7 billion euros ($81.2 billion).

PSA’s group net profit increased 13.2% to a record 3.2 billion euros, and the company increased its dividend against 2019 results to 1.23 euros per share, up 58% from 2018 levels.

The carmaker was “once again very solid”, analysts at brokerage Oddo-BHF said in a note, adding the results confirmed the company’s “best-in-class status.”

Slideshow (5 Images)

But it still faces problems this year, including the coronavirus outbreak which has paralysed production in China and hits carmakers’ supply chain.

PSA suffered 700 million euros in losses last year in China, where its car sales have tumbled and where it is exiting a joint venture with China’s Chongqing Changan Automobile (000625.SZ).

“In January, things were getting better (in Asia) until the coronavirus,” Tavares said, adding PSA planned an electric vehicle “offensive” in China, without giving details.

Reporting by Gilles Guillaume and Sarah White; Editing by Pravin Char and Edmund Blair



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AllianzGI pushes for more climate data ahead of AGM season By Reuters



By Simon Jessop

LONDON (Reuters) – German fund manager Allianz Global Investors is pushing every company it invests in to improve their climate-related disclosures ahead of the season for annual shareholder meetings.

Allianz GI, which manages 557 billion euros ($605.18 billion) as part of insurer Allianz (DE:), said it had updated its Global Corporate Governance Guidelines and would push companies to do more to manage what it said was a critical risk.

Specifically, it wants every company to use the Taskforce for Climate-related Financial Disclosures (TCFD) framework for assessing the impact of climate risk on their business, an initiative kick-started by the Financial Stability Board.

Now with more than 1,000 signatories globally, the TCFD – championed by the United Nations’ incoming climate finance envoy, Mark Carney – is seen by many as a crucial tool in helping investors make more informed decisions on climate risk.

Eugenia Unanyants-Jackson, AllianzGI’s global head of research into environmental, social and governance-related issues, said she expects to see more shareholder resolutions linked to climate change in 2020, with a broadening out from energy companies to other sectors such as financial services.

British lender Barclays (L:) last month became the first European bank to face the prospect of such a vote, in an action coordinated by responsible investment lobby group ShareAction, although pressure is building on peers globally.

“We will… show our support for proposals that seek to hold companies to account, through transparent information sharing, on climate related financial, physical, transition and regulatory risks and how the company is managing those risks.”

In a review of its voting practices in 2019, AllianzGI said it had voted on nearly 100,000 resolutions – from pay to board composition and strategy – at 9,532 company meetings and opposed 24% of all resolutions globally, unchanged on the prior year.

AllianzGI supported all of the climate-linked shareholder resolutions at its U.S. investee companies as they had all targeted companies for which climate was a material business risk, seeking information or the formulation of plans to align strategy with the Paris climate accord.

“Those kind of proposals are definitely in the interest of investors and are something we like, support and encourage,” Unanyants-Jackson said.

After 145 climate-linked resolutions were filed in the United States last year – including at leading oil company ExxonMobil (N:) – the U.S. regulator is mulling plans to limit their future use in a move that has drawn the ire of some leading investors.

($1 = 0.9161 euros)

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Pound Rises, but Experts Warn Upside Limited Ahead of Powell Testimony By Investing.com


© Reuters.

By Yasin Ebrahim

Investing.com – The pound climbed against the dollar on Monday, but some experts warned further gains will likely be kept in check by ongoing UK-EU trade tensions and steady U.S. interest rates.

Market participants should position themselves for a weaker sterling versus the dollar, due to “the likelihood of reduced market expectations for U.S. interest-rate cuts and growing UK-EU trade tensions, RBC said in note.

rose 0.21% to $1.2918.

Cable’s advance, however, could come under pressure as soon as Tuesday, should Federal Reserve Chairman Jerome Powell deliver a positive assessment of the U.S. economy in his semiannual testimony before Congress, RBC said.

The 40-basis-point Federal Reserve rate cuts currently priced in by the market this year “seems excessive” and a “repricing should support continued USD outperformance,” RBC added.

The , which measures the green against a trade-weighted basket of six major currencies, rose by 0.16% to 98.76.

The dollar traded flat against safe-haven currencies as the coronavirus death toll rose to 909, with the number of those infected rising above 40,000.

was unchanged at Y109.68 and fell 0.09% to 0.9769.

fell 0.27% to $1.094, with some warning the coronavirus poses a bigger risk to the economy of Germany, the EU’s growth engine, than that of the U.S.

“The coronavirus and its impact on the global supply chains is seen as a much bigger issue for Germany than for the U.S., thus is under pressure,” ING said.

gained 0.10% to C$1.3225, as falling oil prices continued to weigh on the loonie.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Pound on Back Foot as Traders Fear Rocky Brexit Trade Talks Ahead By Investing.com


© Reuters.

By Yasin Ebrahim

Invesing.com – The U.K. and EU are slated to get trade talks underway only in March, but tough rhetoric from both sides has raised fears that rough negotiations lie ahead, keeping the pound on the back foot against the dollar on Thursday.

fell 0.58% $1.2926.

The dollar was also helped by better-than-expected labor market data, underpinning investor hopes for a robust nonfarm payrolls report due Friday.

The U.S. Department of Labor reported Thursday that dropped by 15,000 to a seasonally adjusted 202,000, beating economists’ forecast for a drop to 215,000.

The , which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.21% to 98.36.

The yen, meanwhile, continued to lose altitude against the greenback as easing coronavirus fears and China’s move to halve tariffs on U.S. goods dented safe-haven demand.

China said it would halve tariffs on $75 billion of U.S. imports as part of its efforts to comply with the phase one agreement that was ratified in Washington last month.

rose 0.10% to Y109.92.

fell 0.20% to $1.0975 as European Central Bank Governor Christine Lagarde reinforced expectations that the central bank’s ultra-loose monetary measures will remain in place at least until the year.

“Moderate growth performance is delaying the pass-through from wage increases to prices and inflation developments remain subdued,” Largarde said. “The euro area economy therefore continues to require support from our monetary policy.”

rose 0.08% to C$1.3292

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Yuan, Aussie on tenterhooks ahead of China market re-opening By Reuters



By Hideyuki Sano

TOKYO (Reuters) – China’s yuan and its proxy, the Australian dollar, were poised for vulnerable day of trade on Monday in favor of safe-harbor currencies, in reaction to authorities’ drastic steps worldwide to curb the spread of a new virus which originated in China.

Immediate focus was on how China’s financial markets would fare when they reopen later in the day, after a Lunar New Year break that was extended to help stop a coronavirus which has killed as many as 350 people in China’s Hubei province.

Overseas, Australia, Singapore and the United States are among countries to have ramped up border controls, banning entry by foreign nationals who have recently visited China.

Ahead of the start of onshore trade, the firmed 0.1% to 6.9889 yuan per dollar , hovering near Friday’s one-month low of 7.0070 yuan.

The Australian dollar fetched $0.66875 , just a hair above its 10 1/2-year low of $0.6670 touched last October. The currency is often regarded as a yuan proxy as it is more freely traded and because of Australia’s reliance on trade with China.

“Given the current fragile sentiment, I would not be surprised to see the Australian dollar slipping below its previous 10-year low,” said senior strategist Yukio Ishizuki at Daiwa Securities.

To prevent economic paralysis triggered by the outbreak, China’s central bank said it will inject 1.2 trillion yuan ($173.81 billion) worth of liquidity into financial markets via reverse repo operations on Monday.

Still, uncertainty created by the epidemic is keeping investors cautious, helping support safe-harbor currencies.

The yen traded at 108.33 yen per dollar , approaching its highest level since Jan. 8.

The Swiss franc changed hands at 0.96335 franc per dollar , near its 15-month high of 0.96135 set last month.

Against the euro, the franc stood at 1.06855 per euro (), just below its 33-month high of 1.0666 touched last week.

The euro stood at $1.1084 (), having risen 0.6% last week for its first weekly gain in five weeks. However, a boost on Friday was due mostly to month-end money flows from European exporters.

Elsewhere, sterling fell 0.2% to $1.3174 in early trade.

Britain laid out a tough opening stance for future talks with the European Union following its exit last week, saying it would set its own agenda rather than meeting the bloc’s rules.

Sentiment toward sterling may also be coloured by a stabbing incident in London on Sunday, which police described as a terrorist incident.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Gold Prices Drift Ahead of Fed Chairman Powell’s Press Conference By Investing.com


© Reuters.

By Geoffrey Smith

Investing.com — Gold prices remained range-bound on Wednesday as markets were content to wait for the press conference of Federal Reserve Chairman Jerome Powell later in the day.

The Fed’s two-day policy meeting wraps up at 2 PM ET (19:00 GMT), and Powell will speak half an hour later. Recent U.S. data – from the rise in the Conference Board’s consumer confidence index to housing starts and the better-than-expected purchasing manager index published by IHS Markit – have suggested the U.S. economy still has enough momentum not to need further stimulus.

However, markets may be more concerned about the fate of the extra liquidity that the Fed pumped into the market via repo transactions before the end of 2019. While he has denied this was a resumption of quantitative easing, the longer the liquidity stays in circulation, the more that line looks like little more than semantic nit-picking.

By 11:30 AM ET (1630 GMT), for delivery on the COMEX exchange were essentially flat at $1,569.35 a troy ounce. was up 0.3% at $1,570.15.

were also flat at $17.43 an ounce, while lost another 1.7% to $977.75 and edged down to $2,184.30 an ounce. That came against a backdrop of a report from German engineering group Robert Bosch, who said that global car sales may already have peaked. Most industrial demand for platinum group metals is down to their use in catalytic convertors in internal combustion engines.

futures, meanwhile, hit their lowest in nearly four months at $2.56 a pound.

Earlier, gold had fallen as low as $1,565.40 as the market zeroed in on strong earnings reports from the likes of Apple (NASDAQ:) and Mastercard (NYSE:). However, there were also enough pockets of weakness to temper demand for risk assets, and lingering concerns about the impact of the novel coronavirus also returned to the fore as British Airway and Lufthansa cancelled all flights to China, while Toyota said it would suspend vehicle production in the country.

The World Health Organization said it would reconvene Wednesday to consider again whether to designate the outbreak a matter of global concern. So far, the death toll has reached 106, while the number of reported cases continues to grow at around 50% a day.

“The Fed set the bar high for further loosening at its last FOMC meeting in December by stating that a ‘material reassessment’ of the outlook would be required for the Bank to consider cutting rates again,” said Capital Economics analyst Simona Gambarini in a research note. “So while the epidemic may get worse, we doubt that the Fed would respond unless there were a much larger and sustained drop in equity prices alongside a substantial worsening in the survey data.”

Gambarini sees gold prices back at $1,400 by year-end, implying more than 10% downside from the current level.

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