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Brussels prepares for May’s visit on Thursday
It’s unlikely to be the most exciting day of the week in financial markets, but that hasn’t stopped them jumping around recently, with various political and economic stories making for a volatile environment.
From a U.K. perspective, the key date this week is tomorrow, when Prime Minister Theresa May heads back to Brussels in the hope of convincing the EU to revisit the backstop issue that has so far prevented her deal getting through Parliament.
I can only hope, for her sake, that she turns up with detailed “alternative arrangements” that interest rather than frustrate her counterparts in the EU, as her vague requests have in the past.
Unfortunately, I’m not particularly confident and think it will likely be another anti-climax that results in May returning to parliament with plan C that somewhat resembles both plan B and plan A that preceded it.
Depending on what exactly their alternative arrangements are, this could be a test of just how feasible Brexiteer plans are for the Irish border, having repeatedly slammed May in the past for not pursuing other solutions.
Stronger dollar not deterring gold bulls
Gold is continuing to hold firm despite the recent rebound in the US Dollar putting it under some pressure. A stronger dollar is typically bearish for gold but at the moment, we are seeing some resilience even as the greenback makes steady gains.
Gold Daily Chart
The break above $1,300 was clearly a very bullish move and traders are reluctant to cave under any immediate pressure. Even $1,310 is holding firm currently, we’re yet to even properly test $1,300, or come close to it.
I don’t necessarily expect that to last, but if we’re seeing such a fight at these levels then I would be surprised if we didn’t see an even more fierce defence of $1,300.
Oil pares losses after inventory data
Oil is trading a little higher this morning, paring losses incurred on Tuesday as API reported a larger than expected inventory number.
The number was only a little higher than analyst expectations and much of the downside in crude came prior to the release. So, unless it came in anticipation of a higher headline number, this would suggest traders were unmoved by the increase.
API Stocks
What is potentially more concerning for oil bulls is that this is the third consecutive increase in stocks—which is expected to be confirmed by the EIA report later today.
Still, with OPEC and its allies seeking to gradually reduce the stock and U.S. oil rigs falling in this low price environment, this downside pressure on WTI and Brent may not last.
A significant break above key resistance – $55 and $65, respectively – may still elude us but I’m not yet seeing much appetite for prices to burst in the other direction. It may simply be a case that record U.S. output and these inventory builds are keeping a cap on prices for now.
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