The yen is gaining strongly, oil is the cheapest since June

Crude oil fell to its lowest level since late June. The loss was 4%. WTI fell below the level of USD 70 and brent fell below the ceiling of USD 75. One reason was an increase in U.S. gasoline inventories, suggesting weaker demand. But the discounts came earlier before the stock data was released.

The ADP report was worse than expected, but it only weakened the USD for a while. Japanese government bond yields are rising rapidly and the yen is strengthening this morning as the market has started evaluate possible rate increases more strongly in the land of the Rising Sun. The Monetary Policy Council left interest rates unchanged (reference 5,75%).

Decrease in gasoline stocks

The oil market is currently focused on demand rather than supply. Concerns about China's economic condition continue to dominate. The decision of Moody's agency certainly left its mark lowered the outlook for China's rating from A1 to negative from stable. Oil did not manage to gain despite a strong increase in oil reserves (5,4 million brk). However, the market focused on the sharp decline in gasoline stocks. Which means demand was weak over the Thanksgiving long weekend. It was 2,5% last week. lower than the 10-year seasonal average. Despite the supply being limited by OPEC + (November 30) the price has already dropped by over 11%.

ADP report disappointed, but it did not weaken the dollar permanently. The EUR/USD rate dropped yesterday to 1,0760. The change in employment in the private sector amounted to 103. which raises speculation that tomorrow's NFP will also show lower values. Let us remember, however, that these data are not strongly correlated with the government publication on the labor market. The forecast indicates that employment will increase to 180. from the previous level of 150 thousand The unemployment rate is expected to stabilize and amount to 3,9%.

The market is still highly pricing in Fed rate cuts in the first half of 2024. The May and June downward movements are now approximately 70%. probability of implementation. For now, the declines in the main currency pair are largely the result of the market assuming that the ECB will be the first to start the cycle of loosening monetary policy before the Fed.

The end of negative interest rates. in Japan?

The yields on Japanese 10-year government bonds are rising strongly today (by 8,5 basis points to 0,73%). The market valuation (swap) at one point indicated as much as 45%. chances of that The BOJ will end its negative interest rate policy this month, and comments from Deputy Governor Ryozo Himino were cited as a key factor driving the move in the debt and currency markets. Just two days ago, the risk was 3,5%. Meanwhile, Kazuo Ueda's morning comments in parliament increased the upward pressure on bond yields and the yen. The Japanese currency strengthened against the USD by 0,4%. We are currently observing strong declines USD / JPY to below 145,00. The BOJ meeting is scheduled for December 18-19.

The Monetary Policy Council kept interest rates unchanged (5,75 percent reference rate). Zloty was unaffected by this decision, which was widely expected. The PLN weakened in relation to the dollar and the USD/PLN exchange rate rose above 4,02. EUR/PLN quotations even reached the level of 4,34, but ended the day at 4,33. This morning, the moderate weakening of the zloty against the euro continues.

Source: Łukasz Zembik, OANDA TMS Brokers