West Texas Intermediate crude dropped from the highest price since September amid speculation that heightened tension between Russia and Ukraine is unlikely to result in a disruption to oil supplies.
WTI futures fell as much as 1.5 percent, declining for the first time in three days. Russian President Vladimir Putin told reporters at his residence near Moscow that there’s no immediate need to invade Ukraine and that Russia isn’t considering absorbing the Black Sea region of Crimea. Investor fears of a supply disruption are misplaced, according to Societe Generale SA. WTI’s rally was unsustainable, a technical indicator shows.
“For the moment the position with regard to Ukraine has stabilized but it remains to be seen what will happen to the loyal Ukrainian forces surrounded in Crimea,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London.
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Oil fell on Tuesday after President Vladimir Putin said Russia would only use military force in Ukraine as a last resort, releasing some tension from a growing crisis in the region that pushed prices to five-month highs in the previous session.
Putin said Russia reserved the right to use all options to protect Russian citizens in Ukraine, but he ordered troops engaged in military exercises near the Ukraine border back to their bases, triggering a retreat in oil prices that had been boosted by worries the conflict would continue to escalate.
April Brent crude fell $2 to near $109 a barrel, after briefly falling $2.09 after Putin’s remarks. The European benchmark ended the previous session at its highest close this year. U.S. crude for April delivery fell by $1.59 to settle at $103.33, after rising to $105.22 on Monday, the highest level since September.
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Gold settled about 1 percent lower on Tuesday as investors took profits from the previous session’s rally to near four-month highs after President Vladimir Putin said Russia would only use military force in Ukraine as a last resort.
Bullion’s drop came as U.S. equities measured by the S&P 500 index surged more than 1 percent to a record high after Putin ordered troops involved in a military exercise near the Ukrainian border back to their bases as he sought to ease tensions.
Prices of safe-haven U.S. Treasury debt also fell following Monday’s gain after escalating military tension between Russia and the West over Ukraine hammered Russian financial markets.
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Supporters of U.S. energy exports have pounced on the crisis in Ukraine to press their case for faster approvals of liquid natural gas (LNG) projects and for an end to the decades-long ban on exports of most U.S. crude oil.
LNG supplies from the United States could help some Western European countries react to any Russian aggression in coming years, but because of added transportation costs the fuel could be too expensive for others in Central Europe who are likely to remain dependent on neighbors, energy experts said.
As President Vladimir Putin’s forces tightened their grip on the Crimea peninsula in the Ukraine on Monday, the moves heightened concerns that the crisis could widen and that Russia could slash its shipments of natural gas to Europe, about half of which are sent through the Ukraine via pipeline.
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Inflation in the euro zone is “way below” the European Central Bank’s goal and the longer it stays at such low levels the harder it will be to get it back up to the target, ECB President Mario Draghi said on Monday.
In prepared remarks for delivery to European lawmakers, Draghi said the ECB’s commitment to delivering price stability was reflected in medium- and longer-term inflation expectations “remaining firmly anchored”.
However, in a follow-up question and answer session, he said inflation risked becoming entrenched at low levels.
“Right now we have a level of inflation which is way below 2 percent,” Draghi told the European Parliament’s Committee on Economic and Monetary Affairs in the Q&A session.
“We know that the longer it stays at the current level, the higher will be the risk that it will not go back to 2 percent in any reasonable time – in other words, the longer will be the risk that inflation expectations could actually be disanchored, and we don’t want that.”
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The Group of Seven major industrialized nations on Sunday condemned Russia’s intrusion into Ukraine and canceled for now preparations for the G8 summit that includes Russia and had been scheduled to take place in Sochi in June, the White House said.
“We, the leaders of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States and the President of the European Council and President of the European Commission, join together today to condemn the Russian Federation’s clear violation of the sovereignty and territorial integrity of Ukraine,” the G7 said in a statement.
“We have decided for the time being to suspend our participation in activities associated with the preparation of the scheduled G8 Summit in Sochi in June,” the group said.
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GBP/USD for Monday, March 3, 2014
Over the last couple of weeks the GBP/USD has received solid support from the key 1.66 level after it retraced strongly from the resistance level at 1.68 and over the last few days it had been placing upwards pressure on a short term resistance level at 1.67 before finishing out last week moving through to above 1.6750. In early February, the pound enjoyed a very healthy time moving well from the support level at 1.6250 through 1.6450 before pushing on to the multi-year high above 1.680. In late January the pound fell sharply and experienced its worst one week fall this year which resulted in it moving to the six week low near the support level at 1.6250. Over the last few months the pound has established and traded within a trading range roughly around the key level of 1.6450, whilst moving down to support at 1.6250 and up to 1.66 and beyond.
The 1.66 level has become quite significant and has loomed large throughout this year providing some resistance to higher prices. This level has resurfaced again as one of significance and it is now providing solid support. In late November it did well to break through the long term resistance level at 1.6250 which had established itself as a level of significance over the last few months. This level continues to play a role in providing support. In early November, the pound bounced strongly off the support level at 1.59 to return back to above 1.6250.
Towards the end of October the GBP/USD slowly drifted lower from the strong resistance level at 1.6250 and down to a three week low just around 1.5900 which was recently passed as the pound moved down towards 1.5850 only a week ago. For the week or so before that the pound moved well from the key level at 1.60 back up to the significant level at 1.6250, only again for this level to stand tall and fend off buyers for several days. Throughout September the pound rallied well and surged higher to move back up strongly through numerous levels which was punctuated by a push through to its highest level for the year just above 1.6250 several weeks ago. In the first week of October the pound was easing back towards 1.60 and 1.59 where it established a narrow trading range between before surging back to 1.6250 again.
Britain’s buoyant housing market showed no signs of cooling in February with the average price of a home 9.4% higher than a year earlier according to Nationwide. It was the strongest rate of annual growth since May 2010, driven higher by a 0.6% increase in prices on a monthly basis, a slightly slower pace than January’s 0.8% rise. UK house prices have now risen for 14 consecutive months on the building society’s measure, with the average home carrying a price tag of £177,846 in February – the highest since April 2008, before the collapse of US investment bank Lehman Brothers which intensified the global financial crisis. Robert Gardner, Nationwide’s chief economist, said that the UK housing market was strengthening against an improved economic backdrop, low borrowing costs and a lack of properties on the market. He said: “Demand continues to be supported by record low interest rates, improved credit availability and rising consumer confidence thanks to the healthy gains in employment recorded in recent quarters.
(Daily chart / 4 hourly chart below)
GBP/USD March 2 at 22:40 GMT 1.6734 H: 1.6746 L: 1.6711
The euro had its biggest monthly gain since April as higher-than-projected inflation spurred speculation the European Central Bank will refrain from additional monetary stimulus at a meeting next week.
The dollar had its worst month since September even after Federal Reserve Chair Janet Yellen reiterated in Senate testimony that the central bank is likely to maintain its strategy of gradually trimming bond purchases. China’s yuan decreased versus all except two of its emerging-market peers in February as the People’s Bank of China considers doubling the size of the currency’s trading band versus the dollar. The ECB meets March 6 in Frankfurt.
“The inflation numbers were better than expected, and some of the expectations for a rate cut next week have been tempered,” Brian Daingerfield, a Stamford, Connecticut-based currency strategist at Royal Bank of Scotland Group Plc, said yesterday in a phone interview. “Going into this week, there was building anticipation for an ECB rate cut.”
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The ruble has taken a big hit as political tensions escalate over the fate of Ukraine and the Russian economy falters.
The currency has fallen by 1.4% versus the U.S. dollar over the past week, bringing its decline for the year to 10%. The dollar now buys 36.10 rubles, a level not seen since 2009.
oreign exchange traders have reacted, in part, to rising regional tension since Ukrainian protestors forced pro-Moscow President Viktor Yanukovych from office.
“Any political volatility or military stand off in the region will send negative signals to [people] who have investments in those countries,” said Lilit Gevorgyan, a senior economist at IHS Global Insight.
“If Russia ventures into military action in Ukraine, this will have a serious impact on the performance of the Russian currency,” she said.
Russia has strategic interests in its neighbor Ukraine, a country that is divided between pro-European regions in the west and a more Russia-oriented east.
Ukraine is a key route for Russian gas exports to Europe and has a large Russian-speaking population. It’s also home to a Russian naval fleet, based in the city of Sevastopol in the Crimean region.
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EUR/USD for Friday, February 28, 2014
Throughout the first half of February the Euro enjoyed a solid move higher moving from support around 1.35 up to test the key level at 1.37. It was able to move through the 1.37 level before consolidating and spending the best part of the last couple of weeks resting on support at that level. Over the last 48 hours the Euro has fallen sharply through the key 1.37 level reaching a two week low in the process before rallying higher in recent hours to move back above the key level. To finish out January the Euro continued its decline and moved to a two month low touching below the support level at 1.35. For the last couple of months the Euro has generally steadied and established a trading range roughly between 1.3550 and the recent resistance level at 1.38, however to finish out several weeks ago the Euro broke down through the support level at 1.3550. The 1.3550 level has become a key level over recent times and a couple of weeks ago the Euro sprung off it to a two week high at the resistance level at 1.37 where it has spent several days consolidating before dropping sharply back to the key 1.3550 level again. After placing some pressure on the resistance level at 1.38 several weeks ago, the Euro has since fallen sharply down to its lowest level in two months.
Through November the Euro enjoyed a solid move higher which saw it return to a wall of resistance at 1.38 and in doing so move to a then six week high. In the few days afterwards the Euro challenged the 1.38 resistance level again before being turned away yet again. In mid November the Euro did well to bounce strongly off support at 1.34 and recover the lost ground from the previous couple of days which saw it fall from the resistance level around 1.3550. This was after a few weeks which saw it move steadily higher from a support level at 1.33 back up to a three week high just above 1.3550. Over the last few months 1.3550 has been a key level.
Towards the end of October the Euro enjoyed a strong surge higher to move through to its highest level in nearly two years just above 1.38 before spending that week content to consolidate around this level. Over the following three weeks it fell heavily down to a support level at 1.33 before recovering well. It moved quite well throughout the middle of October after breaking higher from its sideways range. For the month leading up to that, the Euro traded within a narrow range between 1.3450 and 1.3650 before the range narrowed down to between 1.35 and 1.36. The former level of 1.35 was strongly tested a few weeks ago and has resurfaced as a significant level presently.
A German court decision criticizing the European Central Bank’s government bond buying program could threaten the bank’s ability to activate the program, as the Bundesbank is unlikely to participate, the president of the German IFO Institute for Economic Research has said.
German economist, Hans-Werner Sinn, who also serves on German economy ministry’s Advisory Council said he doubted whether Germany’s central bank would back the program, known as Outright Monetary Transactions (OMT). Germany’s highest constitutional court shocked markets earlier this month by criticizing the OMT, which has been credited with calming financial markets and bringing down borrowing costs for troubled euro zone countries. “The Court considers the OMT decision incompatible with primary law,” it said.
(Daily chart / 4 hourly chart below)
EUR/USD February 27 at 21:25 GMT 1.3712 H:1.3726 L: 1.3643