Jueves, 22 de Marzo de 2018 Redacción

US Federal Reserve sticks to gradualism As expected, the US Federal Reserve (Fed) hiked the Fed funds target range to 1.5%- 1.75% and delivered a more upbeat forecast for the US economy compared to its last release of projections in December last year. Regarding its guidance for further rate increases this year, the updated projections of the Federal Open Market Committee (FOMC) members still see two more rate hikes (i.e. three rate hikes this year) as appropriate, although the vote was very close, with 8 members favouring three or less and 7 members favouring four rate hikes. We still expect the FOMC to shift its guidance to four rate hikes this year when inflation starts to pick up in the coming months. The FOMC increased the projections for 2019 to three rate hikes and to two for 2020, signalling confidence in a record-long economic expansion. The slightly less hawkish message was well received by markets, given the clear guidance ahead of the meeting. The US dollar weakened, but remains well supported by an increased interest rate advantage. We still forecast the EUR/USD to weaken to 1.20 in the next three months before continuing its appreciating trend over the longer term, given the skewed positioning with extreme US dollar pessimism and extremely high euro optimism.

 

The FOMC decision was very much in line with market expectations and accompanied by more upbeat projections, supporting financial market performance on the back of declining uncertainty.

 

David Kohl, Chief Currency Strategist, Julius Baer

 

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Oil: Unexpected inventory decline lifts prices

 

Oil prices surged back towards USD 70 per barrel after the weekly official US oil market statistics showed an unexpected decline in domestic inventories. Additional help came from a somewhat softer US dollar and rising geopolitical concerns due to the Iran nuclear deal coming seemingly under threat. Inventories dropped as refineries ramped up activity earlier and against the seasonal trend –we are still in the maintenance period – while low crude imports and elevated exports additionally reduced available supplies. The market reaction to the weekly statistics was more pronounced as the latest release came at a time when a narrative has been gaining attention concerning accelerating shale boom and rising supplies. We still believe the oil market is more fragile than it seems. The global economy is humming, indeed, but supply is swiftly catching up to strong demand growth with the US, Canada and Brazil pumping more oil. According to our estimates, the global inventory tightening trend should slow and eventually reverse with storage levels no longer declining but again rising later this year. The still-buoyant market mood and the profit-taking risks, as well as the uncertainty concerning the transitioning of the petro-nations’ supply deal, all add to the fragility of the oil market. Venezuela’s collapsing production and the US push against Iran are bullish risk factors, but the latter should be seen in context of the petro-nations’ supply deal as any isolation of Iran will likely threaten compliance to this deal.

 

Oil surged after inventories declined unexpectedly. We continue to see fragility in the oil market. Profit-taking risks still loom large, strong output growth challenges the market-tightening narrative, and the supply deal’s overdue transitioning remains blanketed in uncertainty.

 

Norbert Rücker, Head Macro & Commodity Research, Julius Baer

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