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Today’s markets – Powell, Fed, RBA, China Trade Data, Oil, Gold, Bitcoin

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gold bars - Investors King

By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

It’s shaping up to be another relatively flat day in the markets as investors turn their attention to Capitol Hill ahead of Jerome Powell’s first testimony.

The Fed Chair will appear before the Senate Banking Committee later today to testify on the semi-annual monetary policy report. These events naturally attract a lot of attention but the reality is the Chair’s performance is usually quite polished and uncontroversial, and the occasion itself can drag on and frequently venture away from topic. In other words, we shouldn’t assume we’re about to get fireworks from Powell.

What may make this occasion different is the fact that there’s so much uncertainty around the outlook for interest rates and inflation. While the Fed has maintained that rate hikes must continue, the economic data from January has forced markets to adjust to that reality too so there’s every chance we get a hawkish offensive from Powell.

Considering the likelihood of the January data being a blip rather than a trend, I think it would probably be wiser for Powell to maintain his previous tone as he may risk spooking the markets but if the FOMC truly is weighing up a 50 basis point hike this month, this would be a good opportunity to lay the groundwork for it.

Nearing the end

The RBA appeared to soften its tone once more after hiking rates by another 25 basis points today. The central bank is now of the opinion that inflation has peaked and so multiple rate hikes may no longer be the base case. That said, the RBA will decide meeting by meeting and a lot can change in between. Markets are now pricing in at least one more hike in the cycle and maybe two. The Australian dollar is a little lower on the day as the decision was perceived to be a dovish hike.

Some promising signs

Chinese trade data highlighted some modest improvements but remain quite weak overall. The drop in imports can possibly be attributed to some one-off factors including Covid exit waves and the Lunar New Year and the data will surely improve over the coming months as the economy returns to normal. Exports remained under pressure, although the number was better than expected, indicating still soft global demand which aligns with what we’ve seen recently elsewhere.

Pushing the highs

Oil prices rebounded again on Monday, the second day in a row that they’ve reversed sizeable early losses to end the day in positive territory. They’re now on a good run and traders were clearly not deterred by China’s modest growth target for long. Against that backdrop, it may well be the case that Brent and WTI are about to test the upper end of their trading ranges that they’ve remained within since early December.

A break above $89 would be a very bullish signal for Brent while the same would be true of $83 in WTI. Whether they have the momentum to pull that off may well depend on Powell’s dual testimonies and/or Friday’s jobs data.

Tentatively higher

Gold is edging tentatively higher ahead of Powell’s testimony, during which conditions could become much more volatile. The yellow metal has run into resistance around $1,860 this week which was always likely to be the first test to the upside. Above here, $1,890-$1,900 will be a big test, should it get that far.

Of course, all of this may simply depend on what Powell has to say. A hawkish testimony could wipe out any bullish momentum built up over the last week, at which point attention will shift back to the lows around $1,780-$1,800.

Hanging on in there

Bitcoin has been in consolidation since Friday’s sell-off with traders seemingly fearful of further ripple effects but still willing to hang on for now just in case. It’s been a fantastic year for crypto so far but events late last week were a quick reminder of the challenges facing the industry in the short term and the consequences of that. There’ll also be an eye on Powell’s testimony today as it may influence overall risk appetite in the markets.

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Crude Oil

Oil Prices Decline for Third Consecutive Day on Weaker Economic Data and Inventory Concerns

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Crude Oil

Oil prices extended their decline for the third consecutive day on Wednesday as concerns over weaker economic data and increasing commercial inventories in the United States weighed on oil outlook.

Brent oil, against which Nigerian oil is priced, dropped by 51 cents to $89.51 per barrel, while U.S. West Texas Intermediate crude oil fell by 41 cents to $84.95 a barrel.

The softening of oil prices this week reflects the impact of economic headwinds on global demand, dampening the gains typically seen from geopolitical tensions.

Market observers are closely monitoring how Israel might respond to Iran’s recent attack, though analysts suggest that this event may not significantly affect Iran’s oil exports.

John Evans, an oil broker at PVM, remarked on the situation, noting that oil prices are readjusting after factoring in a “war premium” and facing setbacks in hopes for interest rate cuts.

The anticipation for interest rate cuts received a blow as top U.S. Federal Reserve officials, including Chair Jerome Powell, refrained from providing guidance on the timing of such cuts. This dashed investors’ expectations for significant reductions in borrowing costs this year.

Similarly, Britain’s slower-than-expected inflation rate in March hinted at a delay in the Bank of England’s rate cut, while inflation across the euro zone suggested a potential rate cut by the European Central Bank in June.

Meanwhile, concerns about U.S. crude inventories persist, with a Reuters poll indicating a rise of about 1.4 million barrels last week. Official data from the Energy Information Administration is awaited, scheduled for release on Wednesday.

Adding to the mix, Tengizchevroil announced plans for maintenance at one of six production trains at the Tengiz oilfield in Kazakhstan in May, further influencing market sentiment.

As the oil market navigates through a landscape of economic indicators and geopolitical events, investors remain vigilant for cues that could dictate future price movements.

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Commodities

Dangote Refinery Cuts Diesel Price to ₦1,000 Amid Economic Boost

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Aliko Dangote - Investors King

Dangote Petroleum Refinery has reduced the price of diesel from ₦1200 to ₦1,000 per litre.

This price adjustment is in response to the demand of oil marketers, who last week clamoured for a lower price.

Just three weeks ago, the refinery had already made waves by lowering the price of diesel to ₦1,200 per litre, a 30% reduction from the previous market price of around ₦1,600 per litre.

Now, with the latest reduction to ₦1,000 per litre, Dangote Refinery is demonstrating its commitment to providing accessible and affordable fuel to consumers across the country.

This move is expected to have far-reaching implications for Nigeria’s economy, particularly in tackling high inflation rates and promoting economic stability.

Aliko Dangote, Africa’s richest man and the owner of the refinery, expressed confidence that the reduction in diesel prices would contribute to a drop in inflation, offering hope for improved economic conditions.

Dangote stated that the Nigerian people have demonstrated patience amidst economic challenges, and he believes that this reduction in diesel prices is a step in the right direction.

He pointed out the aggressive devaluation of the naira, which has significantly impacted the country’s economy, and sees the price reduction as a positive development that will benefit Nigerians.

With this latest move, Dangote Refinery is not only reshaping the fuel market but also reaffirming its commitment to driving positive change and progress in Nigeria.

The reduction in diesel prices is expected to provide relief to consumers, businesses, and various sectors of the economy, paving the way for a brighter and more prosperous future.

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Crude Oil

IEA Cuts 2024 Oil Demand Growth Forecast by 100,000 Barrels per Day

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Crude Oil

The International Energy Agency (IEA) has reduced its forecast for global oil demand growth in 2024 by 100,000 barrels per day (bpd).

The agency cited a sluggish start to the year in developed economies as a key factor contributing to the downward revision.

According to the latest Oil Market Report released by the IEA, global oil consumption has continued to experience a slowdown in growth momentum with first-quarter growth estimated at 1.6 million bpd.

This figure falls short of the IEA’s previous forecast by 120,000 bpd, indicating a more sluggish demand recovery than anticipated.

With much of the post-Covid rebound already realized, the IEA now projects global oil demand to grow by 1.2 million bpd in 2024.

Furthermore, growth is expected to decelerate further to 1.1 million bpd in the following year, reflecting ongoing challenges in the market.

This revision comes just a month after the IEA had raised its outlook for 2024 oil demand growth by 110,000 bpd from its February report.

At that time, the agency had expected demand growth to reach 1.3 million bpd for 2024, indicating a more optimistic outlook compared to the current revision.

The IEA’s latest demand growth estimates diverge significantly from those of the Organization of the Petroleum Exporting Countries (OPEC). While the IEA projects modest growth, OPEC maintains its forecast of robust global oil demand growth of 2.2 million bpd for 2024, consistent with its previous assessment.

However, uncertainties loom over the global oil market, particularly due to geopolitical tensions and supply disruptions.

The IEA has highlighted the impact of drone attacks from Ukraine on Russian refineries, which could potentially disrupt fuel markets globally.

Up to 600,000 bpd of Russia’s refinery capacity could be offline in the second quarter due to these attacks, according to the IEA’s assessment.

Furthermore, unplanned outages in Europe and tepid Chinese activity have contributed to a lowered forecast of global refinery throughputs for 2024.

The IEA now anticipates refinery throughputs to rise by 1 million bpd to 83.3 million bpd, reflecting the challenges facing the refining sector.

The situation has raised concerns among policymakers, with the United States expressing worries over the impact of Ukrainian drone strikes on Russian oil refineries.

There are fears that these attacks could lead to retaliatory measures from Russia and result in higher international oil prices.

As the global oil market navigates through these challenges, stakeholders will closely monitor developments and adjust their strategies accordingly to adapt to the evolving landscape.

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