After Monday’s price action, you'd be excused to think that today would have been a “risk-on” day. After all, the major stock averages ended Monday with relatively large green candles and there was some bullish follow-through at the European open. That’s why we thought gold’s earlier rally looked suspicious and that the metal could weaken again.
The slight gains in U.S. equities on Monday failed to influence Asian investors as trade fears and the Renminbi’s slide continued to drive risk aversion. This sharp depreciation in the Chinese currency is worrying investors. In August 2015, the U.S. dollar/Canadian dollar (USD/CNY) currency pair appreciated from 6.21 to 6.44, a two-day gain of 3.85%.
The U.S. dollar ended higher for the third consecutive month in June and made a positive start to the new month and quarter on Monday. However, today it has given up Monday’s gains and was, therefore, trading flat on the week at the time of writing.
Oh, say can you tweet, by the dawn’s early light? The global oil markets are still rolling after President Donald Trump tweeted that maybe the Saudis had agreed to increase output by as much as two million barrels to help replace Iranian supply that the Trump Administration wants to see at zero by early November.
December corn futures finished Friday’s session up 5-½ cents, trading in a 10-¼ cent range, trimming losses for the week to 6-¼ cents. Friday’s Commitment of Traders report showed managed money sold 33,313 futures from June 19 to June 26, expanding their net short position to 90,764.
It has been an interesting first half for 2018. Economic fundamentals and politics took center stage as both fought for market influence. The Federal Reserve is in tightening mode as growth and inflation trended higher, while the trade war between the U.S. and the rest of the world particularly with China and the E.U. intensified further.
Crude oil prices have managed to make back a good chunk of their initial losses after gapping lower following an eye-catching tweet from President Donald Trump at the weekend. The U.S. President claimed that Saudi Arabia King bin Salman had agreed to his request to increase crude oil output by 2,000,000 barrels (per day?) to compensate for what he called the “turmoil and dysfunction in Iran and Venezuela.”
So, President Trump is using his leverage with the Saudis saying you must replace Iranian oil because we have got your back against your nemesis. The Saudis, of course, must look like any move they make is within the boundaries OPEC and Russia has set. Iran Oil Minister Bijan Namdar Zanganeh said any production increase above limits agreed to by OPEC would “breach” the deal, according to a letter he sent to OPEC President Suhail Al Mazrouei and distributed by the Iran Oil Ministry’s news service Shana. OPEC should reject the U.S. call for a production increase which is “politically motivated against Iran,” he said, as reported by Bloomberg.