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US AM Digest: Oil Surges as Saudi Arabia target $100; GBP Underperforms After Inflation Falls

US AM Digest: Oil Surges as Saudi Arabia target $100; GBP Underperforms After Inflation Falls

Justin McQueen, Analyst

Receive the DailyFX US AM Digest in your inbox every day before US equity markets open - signup here

GBP: The Pound is today’s worst performing G10 currency following the release of the today’s UK inflation report whereby inflation fell 0.2ppts to a 1 year low at 2.5%. Consequently, reducing the requirement for the Bank of England to raise interest rate. As a result, GBPUSD briefly tripped through 1.4200 as expectations for a rate rise next month dropped to a 65% probability (Prior 80%), while bets for another rate hike later in the year fell to 5% (Prior 40%).

EUR: Benign inflation continues to be a headache for the ECB, after the latest inflation figures showed a downward surprise in the headline figure to 1.3% from 1.4%, moving further away from the ECB’s 2% price target. As such, EURUSD slipped to intra-day lows of 1.2340, although, EURGBP buying interest on the back of disappointing UK data has help push the Euro back towards 1.2400. Comments from ECB’s Villeroy who stated that he acknowledges the recent moderation in Eurozone growth, however, added that underlying momentum is solid and broad.

CAD: The Loonie is relatively quiet ahead of today’s Bank of Canada rate decision at 14:00GMT. Expectations is that the interest rate will be left unchanged at 1.25% and as such, focus will turn towards the accompanying comments, which may take a ‘wait and see’ approach amid the source of uncertainty surrounding global trade policy and the Canadian outlook. Additionally, the $3bln option expiry situated at the 1.2585-1.2600 has also kept price action relatively calm.

Oil: WTI and Brent crude futures on the surge this morning with the latter back above $72 as Saudi Arabia prefer $80-$100 oil prices. Alongside this, the improved risk sentiment has also buoyed WTI and Brent crude this morning while the latest API report yesterday showed crude stockpiles fell by 1.047mln.

DailyFX Economic Calendar: Wednesday, April 18, 2018 – North American Releases

US AM Digest: Oil Surges as Saudi Arabia target $100; GBP Underperforms After Inflation Falls

Eyes will be on the Bank of Canada rate decision which is expected to maintain interest rates at 1.25%. In terms of US data, the usual weekly DoE report will be released at 14:30GMT, as a reminder, yesterday’s API report showed crude stocks fell by 1mln, while last weeks US crude production rose to a new record of 10.525mln. Elsewhere, Fed’s Dudley is set to speak on the economic outlook at 19:15GMT.

DailyFX Webinar Calendar: Wednesday, April 18, 2018

US AM Digest: Oil Surges as Saudi Arabia target $100; GBP Underperforms After Inflation Falls

IG Client Sentiment Index Chart of the Day: USDCAD

US AM Digest: Oil Surges as Saudi Arabia target $100; GBP Underperforms After Inflation Falls

USDCAD: Data shows 57.4% of traders are net-long with the ratio of traders long to short at 1.35 to 1. In fact, traders have remained net-long since Apr 10 when USDCAD traded near 1.25732; price has moved 0.1% lower since then. The number of traders net-long is 4.2% lower than yesterday and 2.3% higher from last week, while the number of traders net-short is 9.2% lower than yesterday and 5.9% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCAD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDCAD-bearish contrarian trading bias

Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page

Five Things Traders are Reading

  1. DXY Pares Earlier Gains; CAD Eyes BOC Rate Decision” by Christopher Vecchio, Senior Currency Strategist
  2. Trading Outlook for USD, GBP/USD, NZD-pairs, Gold & More” by Paul Robinson, Market Analyst
  3. Wait-and-See Bank of Canada (BoC) to Curb USD/CAD Decline” by David Song, Currency Analyst
  4. S&P 500/Nasdaq Technical Outlook: Don’t Fall in Love with the Rally Just Yet” by Paul Robinson, Market Analyst
  5. GBPUSD Drops After Inflation Falls to Lowest Level in a Year” by Justin McQueen, Market Analyst

The DailyFX US AM Digest is published every day before the US cash equity open - you can SIGNUP HERE to receive this report in your inbox every day.

The DailyFX Asia AM Digest is published every day before the Tokyo cash equity open - you can SIGNUP HERE to receive that report in your inbox every day.

If you're interested in receiving both reports each day, you can SIGNUP HERE.

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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