U.S. economic data was weak yesterday. However, the decline in the Dollar Index was short-lived amid signs of slowing down of Chinese economy, the Yuan has fallen to the three-year low against the U.S. dollar. According to the forecasts of Western banks, China's GDP growth in 2018 will slow down to 5.5% from 7.7 % last year. Total debt of non-financial Chinese companies have reached a record high at $12 trillion, which is 120% of the GDP. The Shanghai Composite stock index is now 60% below the pre-crisis level in 2007. Investors fear defaults of Chinese companies. Due to this the US dollar demand increased for buying U.S. government bonds, which are considered in this situation as "save heaven”. Today, at 15-00 GMT (0) The New Home Sales for January will be released. The preliminary forecast is negative, but is explained by the factor of cold weather. The data impact on the dollar may be limited.
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Today at 9-30 GMT many macroeconomic indicators are to be released in the UK. The main one is the GDP for the fourth quarter. Its outlook is neutral for the poun. Accordingly, if it does not coincide with reality, a strong movement of the British currency is probable.
At 23-50 GMT the information about the bond market in Japan will appear. The forecasts, in our opinion, are in favor of small weakening of the Yen (growth on the USD/JPY chart).
The price of Gold established the four-month high. Investors see it as a "safe asset" in case of a slowdown in global GDP. In the beginning of the year Gold rose in price by 12%, but its price is still well below the maximum of 2011, $1920 per ounce. Meanwhile, net exports from Hong Kong to China in January fell to 89.74 tons from 94.85 tons, or by 5.4%. This week's premium for Gold in Shanghai, compared with its value in London, declined to $0.5-1 per ounce from $11 last week. We do not exclude the downward price correction.
This morning the price of soybean (Soyb) decreased slightly after a few forecasts. The Oil World, a German news agency, downgraded the forecast for soybean crop in Brazil to 85 million tons from 89.5 million tons, expected last month. At the same time it evaluates global stocks at the end of the growing season 2013/14 years at 73.1 million tons. This is higher than 63 million tons a year earlier. According to Oil World, global soybean production in 2014 will grow by 4.7% to 280 million tons. The official Brazilian government agency, Conab expects the soybean harvest in Brazil this year to be 90 million tons. We do not exclude the price correction downwards. The price of natural gas (Natgas) plummeted by 19% within three days. This is the biggest drop in the last seven years.
Market participants believe that the demand for heating gas will be reduced around the beginning of spring. The meteorological agency MDA Weather Services stated that cold in the Midwest and East in the U.S. will end by March 7. Note that the gas reserves in the United States are now at a minimum of ten-year at 1.44 trillion cubic feet. They are 34% below the average level of five years. We believe that the gas trend will keep growing after correction. It is projected that there will be a further decline in stocks by the end of March to about $1 trillion cu. feet. The volume of gas supply for now is 40% below the last year's level. This may indicate the presence of significant problems in the shale gas extraction in the U.S.