Metals and Currencies Daily Market Watch July 30, 2015 - Emkay Commotrade

Macro Headlines

•Fed would raise rates later this year or perhaps as soon as in mid – September when it has "seen some further improvement in the labour market and is reasonably confident that inflation will move back to its 2% objective"

•German consumer sentiments stabilized at 10.1 unchanged from the estimated figure and previous month

•China will step up the regulation of local governments debt to prevent potential risks as country facing strong downward pressure on growth

•Japanese industrial production fell 1.5% in the second quarter

•Pending home sales in the U.S. fell unexpectedly at 1.8% in June, dampening optimism over the health of the housing sector

n Saudi Arabia could cut production at the end of the summer 

Currencies

• USDINR: The Indian rupee rose further against the US dollar as most custodian banks sold the greenback above 63.90-a-dollar levels. The two-day Fed meeting starts today. Dollar index stabilized above 97.50 after Fed hint on rate hike possibly in next meeting. The rupee closed at 63.91 to a dollar in Mumbai. It rose to 63.82 intraday, the highest since Jul. 23 and touched a low of 63.94. Most of Asian currencies gained. After FOMC meet now USD will take more clues from US GDP data due today. USDINR likely to remain firm above Rs.64 levels thus buying on dips is suggested. 

• EURINR: The Euro was treading under pressure as on worries of Greece debt reforms given by IMF. Fed sign of improving jobs market and economic conditions in US added more downside move on Euro against USD. EURINR is expected to move lower towards 70.30-70 levels in coming days.

Commodities

• Base Metals: Base metals rise in the initial trading as global sentiments have improved as china recovered after governments introduced some regulations to support growth. Copper prices closed higher on the London Metal Exchange as global stock markets stabilized after their recent wobbles. The LME's three-month copper contract was up 0.5% at $5,328 a metric ton. Metals stabilized on dollar strength after Fed meeting as given rate hike indications. After sharp sell off after FOMC meet, there would be some limited gains on dollar strength but major focus would remains on China simulative actions and US GDP data due tonight.

Global Economic Events

Precious Metals: Gold steadied stabilized near to $1100 levels after FOMC meeting given dovish outcome and sowed doubts about a potential interest-rate increase in September, citing stubbornly low inflation as a concern. In the statement, the FOMC reaffirmed two conditions for starting to raise rates, that include further labor market improvement and becoming "reasonably confident" inflation will rise to 2% "over the medium term. Inflation has continued to run below the Fed's 2% target, and officials said they were monitoring developments closely--a sign of alarm. The Fed has kept the overnight federal funds rate, and in turn other rates, near zero since December 2008. Gold has traded up 0.33% at $1,096.90 a troy ounce and Silver futures gained 0.32% to $14.790 a troy ounce. Metals are likely to trade under pressure ahead of Fed meeting but further rebound may come in the picture if Fed doesn’t comment on rate hike in this year.

Energy: Crude futures posted relief rally resuming its push back to $50 a barrel, amid a sharp, unexpected draw in inventories last week and indications that Saudi Arabia could cut production at the end of the summer. The U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status report on last night that U.S. crude stockpiles fell by 4.203 million barrels, below expectations for a 1.88 million draw. A week earlier, EIA reported that U.S. crude stockpiles unexpectedly rose by 2.5 million barrels for the week ending on July 17, pushing inventory levels nationwide to 463.9 million. Saudi Arabia is planning to pull back from record-high production levels at the end of the summer, when domestic energy demand subsides, people with knowledge of the matter tell WSJ. Crude soared nearly 3% for the session before paring some of the gains in US and Brent crude for September delivery wavered between $52.52 and $54.30 a barrel before settling at $53.36, up 0.06 or 0.11%. As per the earlier forecast crude was taking good support of 3000 levels any rebound above 3080 likely to post new high above 3100 levels. Today there will be further rise of crude while gas likely to trade firm ahead of EIA stocks report due tonight. Upside limit is at Rs.185.

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