Markets
Stock futures are a tad lower after the robust close overnight. Still, FX markets are almost unaffected after the China Iron ore headlines. Most risk markets are holding steadfast as the much-awaited NPC meeting is expected to set a more unequivocal easing policy stance for the rest of the year
Even although trade tension appeared to rise again today, there is this overall shift to diminishing risk aversion in the context of growing optimism around economies opening-up
The euro remains on the front foot, as risk-positive USD weakness combined with optimism about a Franco-German EU recovery fund proposal adds to the support.
USD/JPY price action has been somewhat choppier, but minor base building price action seems to be emerging as participants mull the normalization trade.
Oil Markets
In addition to the super bullish than consensus draw in the EIA inventory data, investors are taking note that while India's fuel consumption collapsed as much as 70% at one point in April and is now about 40% below 2019 levels with the easing of lockdown measures, according to Bloomberg. Confirming how quickly demand normalizes once mobility restrictions are removed
Why the fall in Cushing inventory is important
The extraordinary economic and market conditions have put incredible stress on a system that rarely has to cope with these extreme imbalances in supply and demand. Billions of dollars of investor money have flowed into the market over the past 15 years, putting additional pressure on a market designed to match buyers and sellers of a physical commodity.
The drop in Cushing inventories alleviated that major WTI stress point that was little more than weeks away from being severely challenged if conditions extend as they stood two weeks ago. The EIA data and the drops in Cushing is the ultimate Alka Seltzer moment for oil futures. Hence prices continue to march higher.
Gold Markets
I am getting asked a lot of questions today as to why gold isn't firing higher. Mind you in 25+ years as a commodity and gold trader; I 've never been asked that question more than this year.
It boils down to top side heavy market positioning and that while FOMC minutes reinforced the Committee's view that a slow economic recovery, they also stuck a deflationary chord that isn't bullish for gold. Strategic long gold and silver buyers are positioning for the enormous wave of asset price inflation and fiat currency debasement, maybe even the biggest in recorded history. The main obstacle in that view is weakening labor markets that could delay an all system go lift-off after lockdown. It's one thing getting factories up and running; it's quite another getting consumer demand going when folks are worried about their jobs
But overall nothing has changed in the bullish gold narrative as the market should remain bid on dips for no other reason than there is a laundry list of reasons to buy gold, (currency debasement and hyperinflation to name a few), and one reason to sell, (which is a vaccine).