ECB: Croatia's Zigman: Oil Price Drop A Positive Development For Inflation Fight
Jun-24 18:04
In his first public commentary since being confirmed on June 19 as Croatia's new central bank governor (and thus ECB Governing Council member), Ante Zigman said on Croatian TV Wednesday that the recent fall in oil prices will help keep inflation contained.
- As quoted by Bloomberg: "We have to pay attention to the stability of prices...geopolitical developments that are tied to the opening of the Strait of Hormuz resulted in the fall of oil prices. That will surely have a positive effect on inflation.”
- In our latest Hidden PDF we characterized Zigman as relatively neutral on the Hawk/Dove spectrum, with his monetary policy leanings still relatively unknown.
- However some of his initial comments suggest that perhaps he leans a little on the cautious side when it comes to tamping down price pressures: “As an economist who grew up in times of hyperinflation in Croatia, that definitely left an impression on me that one must be cautious with inflation, that one must act on time to prevent it from affecting the most vulnerable."
- Zigman replaced Boris Vujcic, who became ECB Vice President this month (replacing de Guindos); Vujcic was close to the neural zone of the ECB Hawk-Dove spectrum as well of late, though historically adopted a slightly more hawkish stance. As such perhaps this will end up being a like-for-like swap.
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COMMODITIES: WTI Crude Extends Selloff Below $90 Amid Renewed Risk Optimism
May-25 17:34
- Oil prices gapped lower to start the week, with front-month WTI futures trading back below $90, currently down 7% on the session as we approach the APAC crossover. Price action may have been exacerbated by holiday-thinned trade, however, renewed optimism that an agreement could be made between the US and Iran is notably boosting global risk sentiment on Monday.
- Media reports suggest the deal would extend the ceasefire by 60 days, during which time the Strait of Hormuz would gradually reopen and the basis for talks on Iran’s nuclear programme would start. Late reports from the Nikkei suggested the timeframe for reopening the Strait could be 30-days, potentially a positive development compared to expectations.
- While a primary technical bull cycle in WTI futures has remained intact, key support is being tested at $90.08, the 50-day EMA. A clear breach of this average is required to highlight a top and the start of a correction.
- For NatGas, TTF weakened sharply today to its lowest level since May 11 amid renewed optimism around a potential deal breakthrough. Thin trading volumes and a more bearish weather outlook likely add further pressure.
- In precious metals, boosted risk and pressure on the dollar is prompting 1.4% gains for spot gold as we approach the end of Monday trade. Price recently breached support at $4501.1, the May 4 low, and signalled a resumption of bearish activity. However, the most recent recovery could be challenging that narrative. Spot silver has risen 3.5%.
IRAN: Nikkei Says Iran to Open Hormuz 30 Days After US Deal to End Fighting
May-25 17:10
- "IRAN TO OPEN HORMUZ 30 DAYS AFTER US DEAL TO END FIGHTING - NIKKEI CITING SOURCE"
- "IRAN WOULD PROCEED WITH CLEARING MINES FROM THE STRAIT DURING A 30-DAY WINDOW FOLLOWING AN AGREEMENT - NIKKEI CITING SOURCE" (Reuters)
- "AFTER AGREEMENT, SHIPS FROM ALL COUNTRIES WOULD BE ABLE TO NAVIGATE FREELY AND SAFELY, JUST AS THEY DID BEFORE DE FACTO SHUTDOWN - NIKKEI"
- "CEASEFIRE AGREED ON BY THE U.S. AND IRAN IN EARLY APRIL WOULD BE EXTENDED FOR 60 DAYS - NIKKEI" (Reuters)
- Piece here: https://asia.nikkei.com/spotlight/iran-tensions/iran-war/iran-to-open-hormuz-30-days-after-us-deal-to-end-fighting-source
FOREX: Boosted Risk Places USD on Back Foot, SEK Outperforms
May-25 16:53
- With most market focus on the rising odds of a near-term deal set to be struck between the US and Iran, risk sentiment has been notably boosted on Monday. While gaps in the agreement remain - namely treatment of enriched materials and sanctions - equity markets globally are rallying and this is providing a negative backdrop for the US dollar
- The latest newsflow amid holiday-thinned trade has seen both the IRNA confirming that an Iran delegation will hold talks in Doha on ending the war and President Trump confirm that negotiations are proceeding nicely. Al-Arabiya then reported that high-level sources say Iran is prepared to transfer highly enriched uranium to China, something that is unclear if the US would accept.
- The USD index has moved back to 99.00, and is now ~0.5% off last week’s recovery highs. Surging risk has propelled SEK, AUD and GBP to the top of the G10 leaderboard, while the likes of CAD, NOK and JPY have had much more contained sessions.
- Recent weakness in AUDUSD appears corrective. Note that moving average studies remain in a bull-mode position. This set-up continues to highlight a dominant uptrend. A clear break of the 50-day EMA, intersecting at 0.7115, would signal scope for a deeper retracement.
- Swedish Krona strength has promoted EURSEK to fall to near one-month lows below 10.80, while NOKSEK continues to edge back towards parity.
- The BOJ’s Core CPI and US consumer confidence highlight another quiet schedule on Tuesday. The focus then turns to Australian CPI and the RBNZ decision Wednesday.
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