Pricey albeit luring gasoline shortage for US refineries.
Asian and European markets have come under pressure before the Fed meeting as investors attempt to cut risk exposure in anticipation of market turbulence.
The projections for the decision remain highly ambiguous, since on the one hand, the Fed's desire to continue normalizing rates, but one the another key indicator of the health of the economy - inflation is still devoid of underlying drivers, remaining heavily dependent on stimulus.The rate change is virtually impossible, but as expected, the Fed will give a green light to the sale of "toxic" securities secured by mortgages and treasury bonds, the cumulative volume of which is 4.2 trillion dollars.The rollback of expectations of government stimulus and the subsequent devaluation of the dollar accelerated inflation in August and the Fed will probably try to keep this driver, clouding the issue of December rate hike. Markets probably realize this, so if the Fed is not overly categorical on this issue, one can expect the dollar to grow after the meeting.
BoJ Thursday meeting.
The Bank of Japan, which is set to announce policy decision on Thursday, is more predictable in its steps than the Fed, since insufficient inflation and weak growth, leave no option but to maintain the status quo and monitor the situation. Unplanned elections in Japan can also affect the yen, as large-scale monetary stimulation is among the instruments of "Abenomics" developed by the current Prime Minister Shinzo Abe.
Elections will be held early next month and the ruling party Abe will try to increase the approval rating, while cracking down on opposition parties. Since the beginning of the year, the Prime Minister's rating has been decreasing and the increase in seats in the parliament is necessary for conducting current economic policy without serious obstacles.
Oil prices.
The oil market remains flaccid staying on multi-month peaks, but the prospects for the balance are difficult to assess due to conflicting factors. The API and EIA report will probably show an increase in inventories, which unlike last week will not be ignored by the market.The positive news was the report of Saudi Arabia and Iraq on the reduction of supplies in accordance with the OPEC + deal extended in May. According to the Iraqi official, production fell from 4.5M to 4.32M barrels. Data from Saudi Arabia showed that exports decreased from 6.9M to 6.7M barrels.
Nevertheless, the rise in gasoline prices due to a shortfall as a result of Hurricane Harvey formed an attractive margin for US refineries. The largest oil refinery Motive Enterprises attempted to take advantage of the situation, announcing that maintenance works will be postponed to April. Accelerated restart of the refinery allows us to expect that shale output will recover to previous levels faster than expected. The EIA also said that oil production in the country will grow for the 10th month in a row in October, reaching 6.1M barrels.
The forecast for oil prices implies a decrease in WTI below $ 50 in the medium term.
Bank of Canada.
The Canadian regulator will continue to rely on data to shape monetary policy said bank governor Timothy Lane. He suggests that after two rate increases special caution must be exercised in decisions on further tightening, since the revaluation of the currency is not in the interests of a country that is highly dependent on exports. The USDCAD added about 100 points on the official's statement.
Sterling
The head of the British Central Bank, Mark Carney, send the pound down on Monday saying that tightening of the policy will be limited and gradual.
The official hastened to adjust the mood of the markets, which considered the recent meeting of the Central Bank as a capitulation before the out-of-control inflation and deterioration of the labor market situation. Carney allowed the policy to tighten on the upcoming expectations, but the traditional dove Gertjan Vlieghe provoked a second wave of the rally.
The projections for the decision remain highly ambiguous, since on the one hand, the Fed's desire to continue normalizing rates, but one the another key indicator of the health of the economy - inflation is still devoid of underlying drivers, remaining heavily dependent on stimulus.The rate change is virtually impossible, but as expected, the Fed will give a green light to the sale of "toxic" securities secured by mortgages and treasury bonds, the cumulative volume of which is 4.2 trillion dollars.The rollback of expectations of government stimulus and the subsequent devaluation of the dollar accelerated inflation in August and the Fed will probably try to keep this driver, clouding the issue of December rate hike. Markets probably realize this, so if the Fed is not overly categorical on this issue, one can expect the dollar to grow after the meeting.
BoJ Thursday meeting.
The Bank of Japan, which is set to announce policy decision on Thursday, is more predictable in its steps than the Fed, since insufficient inflation and weak growth, leave no option but to maintain the status quo and monitor the situation. Unplanned elections in Japan can also affect the yen, as large-scale monetary stimulation is among the instruments of "Abenomics" developed by the current Prime Minister Shinzo Abe.
Elections will be held early next month and the ruling party Abe will try to increase the approval rating, while cracking down on opposition parties. Since the beginning of the year, the Prime Minister's rating has been decreasing and the increase in seats in the parliament is necessary for conducting current economic policy without serious obstacles.
Oil prices.
The oil market remains flaccid staying on multi-month peaks, but the prospects for the balance are difficult to assess due to conflicting factors. The API and EIA report will probably show an increase in inventories, which unlike last week will not be ignored by the market.The positive news was the report of Saudi Arabia and Iraq on the reduction of supplies in accordance with the OPEC + deal extended in May. According to the Iraqi official, production fell from 4.5M to 4.32M barrels. Data from Saudi Arabia showed that exports decreased from 6.9M to 6.7M barrels.
Nevertheless, the rise in gasoline prices due to a shortfall as a result of Hurricane Harvey formed an attractive margin for US refineries. The largest oil refinery Motive Enterprises attempted to take advantage of the situation, announcing that maintenance works will be postponed to April. Accelerated restart of the refinery allows us to expect that shale output will recover to previous levels faster than expected. The EIA also said that oil production in the country will grow for the 10th month in a row in October, reaching 6.1M barrels.
The forecast for oil prices implies a decrease in WTI below $ 50 in the medium term.
Bank of Canada.
The Canadian regulator will continue to rely on data to shape monetary policy said bank governor Timothy Lane. He suggests that after two rate increases special caution must be exercised in decisions on further tightening, since the revaluation of the currency is not in the interests of a country that is highly dependent on exports. The USDCAD added about 100 points on the official's statement.
Sterling
The head of the British Central Bank, Mark Carney, send the pound down on Monday saying that tightening of the policy will be limited and gradual.
The official hastened to adjust the mood of the markets, which considered the recent meeting of the Central Bank as a capitulation before the out-of-control inflation and deterioration of the labor market situation. Carney allowed the policy to tighten on the upcoming expectations, but the traditional dove Gertjan Vlieghe provoked a second wave of the rally.
This analysis is provided as general market commentary and does not constitute investment advice. Past performance is not indicative of future results
