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ECB Keeps Policy Settings Unchanged Awaiting Political Clarity



  • ECB Keeps Policy Settings Unchanged Awaiting Political Clarity

The European Central Bank kept interest rates unchanged at record lows and maintained its quantitative-easing program as officials monitor the economic recovery and the risk of political turbulence in the region.

The Governing Council reaffirmed its decision that asset purchases will continue at a monthly pace of 60 billion euros ($65 billion), down from 80 billion euros prior to April. Policy makers left the main refinancing rate at zero and the deposit rate and marginal lending rate at minus 0.4 percent and 0.25 percent respectively, as predicted by all economists in a Bloomberg survey.

The ECB also said rates will stay at present or lower levels for an extended period, and well past the horizon of net asset purchases, which remain flexible in size and duration if the outlook becomes less favorable. President Mario Draghi will explain the decision in a press conference at 2:30 p.m. in Frankfurt.

The euro fell to a session low of $1.0882 after the decision and traded at $1.0888 at 1:47 p.m. Frankfurt time.

Political risks have dominated much of the year so far, leaving the ECB cautious even as data point to a strengthening recovery. With one of those risks — a euro-skeptic victory in the French presidential election — looking less likely after Sunday’s first round vote, officials may now have more confidence in the economy. Some policy makers have already pushed for discussions around an eventual exit strategy, a debate Draghi has tried to stymie for now.

Before the decision, a further signal of euro-area strength came from a European Commission report showing economic confidence jumped this month to the highest level in almost a decade.

Draghi may still choose to use his opening statement at the press conference to say that risks to the growth outlook are balanced, rather than being to the downside. Even so, he’s likely to repeat his view that monetary support is still needed, with underlying consumer-price growth weak and the level of uncertainty high.

Stimulus Timeline

Thursday’s Governing Council decision is in line with a plan set out in December, when the ECB announced that bond purchases will be extended until at least the end of 2017. That will take the total amount of assets bought under the program to 2.28 trillion euros, equivalent to about a quarter the size of the entire euro-area economy.

Economists predict the first hints of an exit from this extraordinary stimulus to come by June 8, when the Governing Council next announces policy and publishes projections on the economic outlook. The ECB could change its forward guidance as a first step toward phasing out QE at the beginning of 2018 and conducting the first rate hike in the third quarter of that year, according to the survey.

By the June meeting, France will have elected its new president, offering the ECB more certainty on the political front, though risks remain in nations such as Italy and Greece. Germany will hold elections in September.

On the economic side, officials will have had two quarters of inflation rates averaging above 1.6 percent — according to forecasts — and at least a small uptick in underlying price growth that could justify a more optimistic tone. Price data for April is scheduled to be released on Friday at 11 a.m. Frankfurt time.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

Crude Oil

Oil Posts 2% Gain for the Week Despite India Virus Surge



Crude Oil - Investors King

Oil prices steadied on Friday and were set for a weekly gain against the backdrop of optimism over a global economic recovery, though the COVID-19 crisis in India capped prices.

Brent crude futures settled 0.28% higher at $68.28 per barrel and U.S. West Texas Intermediate (WTI) crude advanced 0.29% to $64.90 per barrel.

Both Brent and WTI are on track for second consecutive weekly gains as easing restrictions on movement in the United States and Europe, recovering factory operations and coronavirus vaccinations pave the way for a revival in fuel demand.

In China, data showed export growth accelerated unexpectedly in April while a private survey pointed to strong expansion in service sector activity.

However, crude imports by the world’s biggest buyer fell 0.2% in April from a year earlier to 40.36 million tonnes, or 9.82 million barrels per day (bpd), the lowest since December.

In the United States, the world’s largest oil consumer, jobless claims have dropped, signalling the labour market recovery has entered a new phase as the economy recovers.

The recovery in oil demand, however, has been uneven as surging COVID-19 cases in India reduce fuel consumption in the world’s third-largest oil importer and consumer.

“Brent came within a whisker of breaking past $70 a barrel this week but failed at the final hurdle as demand uncertainty dragged on prices,” said Stephen Brennock at oil brokerage PVM.

The resurgence of COVID-19 in countries such as India, Japan and Thailand is hindering gasoline demand recovery, energy consultancy FGE said in a client note, though some of the lost demand has been offset by countries such as China, where recent Labour Day holiday travel surpassed 2019 levels.

“Gasoline demand in the U.S. and parts of Europe is faring relatively well,” FGE said.

“Further out, we could see demand pick up as lockdowns are eased and pent-up demand is released during the summer driving season.”

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Lagos Commodities and Futures Exchange to Commence Gold Trading



gold bars

With the admission of Dukia Gold’s diversified financial instruments backed by gold as the underlying asset, Lagos Commodities and Futures Exchange is set to commence gold trading.

According to Dukia Gold, the instruments will be in form of exchange-traded notes, commercial papers and other gold-backed securities, adding that it will enable the company to deepen the commodities market in Nigeria, increase capacity, generate foreign exchange for the Nigerian government to better diversify foreign reserves and create jobs across the metal production value chain.

Tunde Fagbemi, the Chairman, Dukia Gold, disclosed this while addressing journalists at Pre-Listing Media Interactive Session in Lagos on Thursday.

He said, “We are proud to be the first gold company whose products would be listed on the Lagos Futures and Commodities Exchange. The listing shall enable us facilitate our infrastructure development, expand capacity and create fungible products.

“This has potential to shore up Nigeria’s foreign reserve and create an alternative window for preservation of pension funds. A gold-backed security is a hedge against inflation and convenient preservation of capital.”

“As a global player, we comply with the practices and procedures of London Bullion Market Association and many other international bodies. Our refinery will also have multiplier effects on the development of rural areas anywhere it is located,” he added.

Mr Olusegun Akanji, the Divisional Head, Strategy and Business Solutions, Heritage Bank, said the lender had created a buying centre for verification of quality and quantity of gold and reference price to ensure price discovery in line with the global standard.

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Crude Oil

Oil Nears $70 as Easing Western Lockdowns Boost Summer Demand Outlook



Crude oil

Oil prices rose for a third day on Wednesday as easing of lockdowns in the United States and parts of Europe heralded a boost in fuel demand in summer season and offset concerns about the rise of COVID-19 infections in India and Japan.

Brent crude rose 93 cents, or 1.4%, to $69.81 a barrel at 1008 GMT. U.S. West Texas Intermediate (WTI) crude rose 85 cents, or 1.3%, to $66.54 a barrel.

Both contracts hit the highest level since mid-March in intra-day trade.

“A return to $70 oil is edging closer to becoming reality,” said Stephen Brennock of oil broker PVM.

“The jump in oil prices came amid expectations of strong demand as western economies reopen. Indeed, anticipation of a pick-up in fuel and energy usage in the United States and Europe over the summer months is running high,” he said.

Crude prices were also supported by a large fall in U.S. inventories.

The American Petroleum Institute (API) industry group reported crude stockpiles fell by 7.7 million barrels in the week ended April 30, according to two market sources. That was more than triple the drawdown expected by analysts polled by Reuters. Gasoline stockpiles fell by 5.3 million barrels.

Traders are awaiting data from the U.S. Energy Information Administration due at 10:30 a.m. EDT (1430 GMT) on Wednesday to see if official data shows such a large fall.

“If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January,” Commonwealth Bank analyst Vivek Dhar said in a note.

The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in the United States and Europe.

Euro zone business activity accelerated last month as the bloc’s dominant services industry shrugged off renewed lockdowns and returned to growth.

“The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise,” Commerzbank analyst Eugen Weinberg said.

This has offset a drop in fuel demand in India, the world’s third-largest oil consumer, which is battling a surge in COVID-19 infections.

“However, if we were to eventually see a national lockdown imposed, this would likely hit sentiment,” ING Economics analysts said of the situation in India.

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