The Doha negotiations could not agree; the price of oil collapses
SNB intervened to weaken the franc (the author – Yenn Kvelenn, market analyst)
Swiss National Bank has no choice but to defend the franc from the still weakening single European currency. This week, the total volume of demand deposits increased by 2.8 billion. Francs to 486.4 billion., Which almost corresponds to the increase in the last week, when the rate rose sharply to 2.67 billion. Francs. We get more and more evidence that the SNB has to fight against excessive franc strengthen.
In fact, the downward pressure on the euro-franc pair will continue because of the conservation of the former ECB monetary policy, as well as concerns about the problems of a possible exit from ESS UK and Greece. Although Tomas Dzhordan last Saturday and said that the SNB still has enough room for the “war on markedly overvalued franc”, we believe that the SNB was trapped and that he is not a lot of tools for weakening the national currency. Negative interest rates can not be lowered down deep because this will mean a significant risk of banking panics, and rate peg, in our opinion, would be too expensive to provide, in view of the fact that the risk of collapse of the euro could lead to unlimited losses.
At the moment, the Swiss financial authorities take a wait and see attitude, gradually implementing the intervention. They hope for the best, but prepare for the worst. We maintain our forecast decline in the euro-franc.
The failure of the oil negotiations; Oil prices are falling (the author – Peter Rosenstreich, head of market strategy)
The Doha negotiations have not led to an agreement to freeze oil production levels, which led to crude oil prices down by more than 4%. Rigid energy prices correlated with quotations in stock markets indicate that today have strong impact on the US stock market (expect a large decline in the oil and gas sector). The summit in Qatar (involving both OPEC members and other countries) has not led to a final agreement, as Saudi Arabia has refused to reduce production without obtaining commitments from other major producers, including Iran. Iran announced that it will not send representatives to the meeting, which was held over the weekend, which significantly reduced expectations for an agreement last week. However, there are rumors that Russia, Qatar, Venezuela and Saudi Arabia approved the draft agreement. However, the report, and that was the last time Saudi Arabia has refused any commitment as Iran remained outside the agreement. The failure of the negotiations undoubtedly highlighted political differences between Saudi Arabia and Iran, which have crossed economic considerations. OPEC talks were given an opportunity to restore his tattered reputation organization having an exceptional impact on oil prices. In the short term disappointment in OPEC (in favor of the oil bears) have a negative impact on investor sentiment for commodities. We believe that the commodity currencies such as the Canadian and Australian dollars and the Norwegian krone, faced with falling demand. Among emerging market currencies, we will follow the ruble in anticipation of an active reaction bears. In addition, in view of the IMF’s data on the annual low of long positions in the US dollar, we do not exclude that the rally weakened the dollar will continue.
Bears not right oil
However, in the medium term, we maintain a bearish outlook at least in relation to the price of oil than most analysts. The prices depend on demand to the same extent as on the proposals and the latest economic data, especially from China, point to stabilization of demand. Global growth remains a concern, but the fear of deflation risk seems to have weakened. So, housing prices in China in March rose again, this time in 62 of 70 cities in the monthly basis. Finally, the theory that the offer of an oil producer can easily maneuver in one direction or another, it is incorrect (for example, in relation to production growth restriction). The collapse of the capital costs (including maintenance costs), and the tightening of credit conditions in the energy sector indicates a significant time lag between rising prices and reducing supply on the market.
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