Dollar depressing, crude rising
Mihir Kapadia, CEO and Founder of Sun Global Investments, has reported on US Federal Reserve meeting, currencies and commodities.
FED led market
This time yesterday European stocks were opening lower and the US futures indicated to follow the same path. However, by the end of the day it was another case of green stock screens and new all-time highs on most US Indices.
U.S. equities rose on Tuesday as the Federal Reserve kicked off a two-day monetary policy meeting. The Dow Jones Industrial Average gained 39.45 points, or 0.18%, to 22,370.80, while the S&P500 rallied 2.78 points, or 0.11%, to 2,506.65.
The Federal Reserve is likely to conclude its meeting today and announce the beginning of a long slow programme to shrink its balance sheet by reducing bond holdings and offer some more thoughts about the prospects for another rate increase this year.
Our view is that there will be no increase in interest rates but a reasonably strong hint of an interest rate increase before the end of the year will be given.
The dollar continued to edge lower in Asian trading ahead of the Fed in focus. The key determinant of the short-term direction of the U.S. dollar will be Fed comments with respect to a December rate hike and the policy outlook. A dovish emphasis is likely to put further pressure on the US dollar.
Oil rose on Wednesday, setting pace to rise by 15.5 per cent this quarter – its largest third-quarter gain in 13 years. The price rise has been stimulated by comments from the Iraqi oil minister that OPEC and its partners were considering extending or deepening supply cuts to erode an existing global surplus.
The oil markets are currently in its best period since the last year, with a robust working production cutback from OPEC and its partners contributing towards stabling the market.
While there has been aggressive counterweight from US oil & shale overproduction, the meticulous cutback from OPEC has been the de-facto contribution towards the period of stability.
At this pace, we might well see a height of $57-$60 (AED 209- AED220) by the beginning of 2018.
Brent crude futures rose 29 cents to $55.43 (AED203.4) a barrel by 0800 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up 42 cents at $49.90 (AED179) a barrel.
Gold is trading a three- week low at $1312 (AED4815) per oz.”