CURRENCIES

Pound Sterling Analysis: GBP/USD, GBP/JPY

• Mixed economic signals and Bank of England (BoE) comments on inflation complicate GBP recovery.
• GBP/USD faces challenges gaining momentum, hovering below key resistance levels.
• GBP/JPY shows signs of stability near yearly highs amid speculation of potential JPY intervention.

Insights on Sterling’s Performance

• BoE anticipates a sharp decline in inflation, targeting a 2% rate by mid-year despite mixed CPI results.
• Persistent wage growth and services inflation in the UK suggest that higher interest rates may be necessary longer than anticipated.
• BoE Governor Andrew Bailey notes a softening labor market, forecasting a significant drop in next month’s inflation figures.
• Monetary Policy Committee member Megan Greene mentions difficulties in achieving full disinflation, indicating possible pressures on GBP.

GBP/USD Trading Dynamics

• Recent attempts to stabilize and recover to the 1.2500 level falter amid strong USD conditions.
• Despite a slight retreat in the US Dollar Basket (DXY), GBP/USD struggles to overcome the 1.2500 resistance.
• Failure to surpass 1.2500 may lead to further declines, with potential targets near 1.2200.
• A successful breach above 1.2500 could lead to a recovery towards the 200-day simple moving average, contingent on USD performance.

Overall Market Considerations

• The interplay of UK economic fundamentals and US dollar strength remains a key challenge for GBP stabilization and growth.

STOCK MARKET

Market Overview: Impact of Mideast Tensions

• Global stock markets experienced declines due to escalating conflicts in the Middle East.
• Haven assets such as U.S. Treasuries, the dollar, Swiss franc, yen, and gold saw notable gains amid growing geopolitical risks.

Detailed Market Movements

• 10-year U.S. Treasury yields dropped by up to 14 basis points as investors sought safer assets.
• The U.S. Dollar Index increased by as much as 0.6%.
• Oil prices surged over 4%, with Brent crude briefly topping $90 per barrel before falling back.

Geopolitical Developments and Market Reactions

• Recent missile strikes by Israel on Iran intensified market volatility, following an attack from Iran earlier in the week.
• Initial market reactions were risk-averse, though some stability returned after Iran confirmed the safety of its Isfahan nuclear site.

Sector-Specific Impacts

• Semiconductor sector faced challenges as Taiwan Semiconductor Manufacturing Co. adjusted its revenue growth forecast downward.
• Infosys Ltd. saw a decline in U.S. trading following a modest sales growth forecast for the year.

Economic Data and Monetary Policy

• Japanese inflation data came in below expectations, influencing Bank of Japan rate speculation.
• Comments from Federal Reserve officials indicated a cautious approach to interest rate adjustments, with no immediate plans for cuts.

Global Currency and Crypto Markets

• Emerging market currencies, including the Mexican peso and Indian rupee, weakened against the dollar.
• Cryptocurrencies, including Bitcoin, retreated amidst the broader market downturn.

Credit and Investment Outlook

• The credit risk for Asia excluding Japan increased significantly, with credit default swaps rising sharply.
• Investment strategies may need to adapt to a prolonged period of higher inflation and interest rates, as suggested by industry experts.

Geopolitical Risk Assessment

• Israel’s credit rating was downgraded by S&P due to heightened regional tensions, affecting the outlook on geopolitical stability in the Middle East.

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CURRENCIES

US Dollar’s Current Trajectory: Despite a recent pullback from multi-month highs, the US dollar remains bullish. This comes after senior Federal Reserve officials suggested a potential delay in easing monetary policy due to strong economic indicators and persistent inflation.

Key Currency Pair Analysis: Technical analysis will next examine the US dollar against four major currency pairs: EUR/USD, GBP/USD, USD/JPY, and USD/CAD. This section will detail the critical price levels that may act as support or resistance in the upcoming trading sessions.

EUR/USD Technical Outlook: The EUR/USD pair found stability after recent declines, bouncing back from the key 1.0600 level and climbing above 1.0650. Resistance is anticipated at 1.0695 and 1.0725, with a further upside target at 1.0820. Conversely, if the downward pressure resumes, the 1.0600 mark is crucial for bulls to defend. A breach below could exacerbate selling, potentially pushing the pair towards the yearly low of around 1.0450.

STOCK MARKET

Impact of High Rates on Stocks: Despite recent concerns, high interest rates have not consistently hindered stock performance. Historical data shows variable effects of rate changes on the stock market.

Historical Performance Data: According to BMO Capital Markets, the S&P 500 showed a significant difference in performance based on the 10-year Treasury yield levels. When the yield was under 4%, the average annual return was 7.7%. However, when the yield rose to 6% or higher, the return nearly doubled to 14.5%.

Rate Direction and Stock Performance: Stocks have historically fared better during periods of rising rates compared to falling rates. Specifically, the S&P 500 averaged a 13.9% return during times of increasing rates, as opposed to only 6.5% during periods of declining rates. This pattern suggests that rising rates often coincide with stronger economic conditions.

Current Trends in Bond Yields and Stock Market: Since the beginning of April, the 10-year Treasury yield has surged by approximately 40 basis points to around 4.58%, a peak not seen since November 2023. Concurrently, the S&P 500 has experienced a decline of over 4%.

Market Outlook and Rate Expectations: Despite the uptick in yields driven by inflation concerns and revised expectations for Federal Reserve rate cuts, the bond market’s response might reflect positive anticipations of economic growth and effective inflation management, which can benefit stocks. Belski from BMO projects that, with yields likely to stabilize between 4% and 5% and coupled with strong employment and earnings, the stock market is positioned for a successful year-end.

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Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

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The above data is for reference only, please refer to the MT4/MT5 software for specific data.

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The world runs on oil. From powering our vehicles to fuelling factories and generating electricity, this fossil fuel remains a critical driver of the global economy. The global crude oil market size is estimated as a staggering USD 3 trillion in 2023, highlighting the immense influence oil has on our world. But where does all this oil come from?

A select group of countries dominates the oil export market, and their production decisions have a ripple effect felt worldwide, impacting not only gas prices at the pump but also exciting opportunities for energy CFD (contract for difference) traders.

This guide delves into the world’s top 10 oil exporters, estimated for 2023, providing a glimpse into their production power and the factors that influence their output.

Saudi Arabia

The undisputed champion of oil exports, Saudi Arabia boasts the world’s second-largest proven oil reserves, estimated at around 270 billion barrels.  They are a founding member of the Organisation of the Petroleum Exporting Countries (OPEC), a powerful group that influences global oil production quotas.

Any decision by Saudi Arabia regarding production levels, which averaged around 11 million barrels per day (bpd) in 2023, can send shockwaves through the oil market.

Russia

Another heavyweight contender, Russia holds the world’s eighth-largest proven oil reserves, estimated at around 80 billion barrels. It’s also a member of OPEC+, an alliance that includes non-OPEC members like Russia.

Russia’s average oil production in 2022 was around 10.7 million bpd. While overall exports remained steady in 2023, the EU embargo has shifted their focus to India and China, who now account for 90% of Russia’s seaborne crude exports. Political tensions remain a key factor for CFD traders to watch.

United States

The American story in oil has seen a dramatic shift. Thanks to advancements in shale oil extraction technology, the US has become a major oil exporter, rivalling traditional giants.

In 2023, a staggering 54.36% of US trade in oil, gasoline, and natural gas has been exports. This surge, with oil leading the way in exports for the first time in 50 years, has significantly impacted global oil prices and solidified the US as a major player in the energy market.

Canada

North America’s other oil powerhouse, Canada boasts vast reserves of shale oil, estimated at around 170 billion barrels. Similar to the US, technological advancements have fuelled a production boom.

Canadian exports of crude oil and equivalent products also reached a record high in 2023. Steadily rising since 2021, crude oil exports totalled 230.0 million cubic metres, up 3.2% from 2022. This export surge, coupled with global market conditions, significantly impacts global oil prices.

Iraq

Iraq, an OPEC member, boasts significant oil reserves of around 145 billion barrels and is actively rebuilding its export capacity. In 2023, it emerged as a key player, exporting 1.23 billion barrels, a 5.36% increase from 2022, generating $87.6 billion in revenue.

Oil contributes approximately 96% to Iraq’s income, aiding in managing debts and budget deficits. Yet, Iraq’s production levels remain vulnerable to political and economic fluctuations, adding complexity to the oil market.

United Arab Emirates (UAE)

A key player in the Middle East, the UAE maintains its position as a top oil exporter. The country’s oil reserves are around 107 billion barrels. In 2023, the UAE flexed its muscle by exporting over 140 million tonnes of crude oil, solidifying its role as a major supplier in the global market. 

As a major oil producer and OPEC member, UAE significantly impacts the global oil market through its high production volume and role in shaping production decisions.

Kuwait

A major power in the Persian Gulf, Kuwait is one of the world’s largest crude oil exporters, shipping a significant 1.92 million bpd to primarily Asian markets in 2023. This impressive export volume is fuelled by Kuwait’s vast oil reserves, estimated at around 130 billion barrels.

However, Kuwait’s oil exports are shifting slightly.  Due to the addition of new refining capacity, Kuwait is exporting a larger percentage of refined petroleum products and a slightly lower volume of crude oil.

Norway

Standing out from the OPEC crowd, Norway is a European oil giant with proven reserves estimated at around 8.3 billion barrels. Capitalising on high global oil prices, Norway exported nearly 93 million metric tons of petroleum and petroleum products in 2023. This represents the highest annual figure for Norway’s petroleum exports between 2013 and 2023.

Oil and gas continue to be the backbone of the Norwegian economy, making up a substantial 73 percent of the value of all goods exported from Norway in 2022.  While not a member of OPEC, Norway closely cooperates with the organisation to influence global oil production and pricing.

Nigeria

Africa’s undisputed champion of oil production, Nigeria boasts proven reserves of around 37 billion barrels. Crude oil is the lifeblood of the Nigerian economy, accounting for a staggering 81% of the country’s export value in 2023.

In 2023 alone, Nigeria raked in an estimated USD 25.4 billion from oil exports, highlighting the critical role this resource plays in fuelling the nation’s financial well-being.

Kazakhstan

A Central Asian oil producer with significant reserves, Kazakhstan exported roughly 1.43 million bpd in 2023. However, Kazakhstan faces a geographical challenge: a large portion of its oil exports, estimated at around 97%, rely on Russia’s pipeline network.

This dependence adds another layer of complexity to Kazakhstan’s oil industry, as any disruptions in Russia, like pipeline maintenance or political tensions, can significantly affect Kazakhstan’s ability to export its oil to the global market.

In conclusion, the top oil exporters play a critical role in the global oil market, directly impacting prices. By staying informed about these key players and the factors influencing their production, traders can leverage this knowledge to navigate the exciting world of oil CFD trading.

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Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

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Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

CURRENCIES

U.S. Dollar Strengthens: The U.S. dollar saw gains as Fed Chair Powell adopted a hawkish stance. This occurred alongside a rise in U.S. Treasury yields, with the 2-year note nearing the 5.00% level.

Powell’s Hawkish Remarks: Speaking in Washington, Powell noted a slowdown in disinflation and ongoing firm price pressures, introducing uncertainty around the timing of future rate cuts.

Implications for U.S. Dollar: High borrowing costs are likely to persist, which is expected to support the U.S. dollar, particularly as other central banks like the ECB and the Bank of England lean towards easing.

Technical Analysis on FX Pairs: The article next explores the technical setups for EUR/USD, USD/JPY, and GBP/USD, focusing on key support and resistance levels critical for risk management and trading strategy.

EUR/USD Technical Outlook: After a bearish breakdown at 1.0635, EUR/USD may continue to decline, potentially approaching the 2023 low near 1.0450. Conversely, a rebound above 1.0635 could face resistance at 1.0700 and possibly extend to 1.0725. A break above this could lead to a rally towards significant moving averages around 1.0820.

STOCK MARKET

Powell’s Remarks on Inflation: Federal Reserve Chair Jerome Powell noted that it would take longer than previously anticipated for inflation to decrease to the Fed’s 2% target, implying extended high interest rates.

Ongoing Restrictive Policy: Powell highlighted the strong labor market and modest progress on inflation as reasons to maintain restrictive monetary policies for a more extended period to allow further data analysis and guidance.

First Quarter Inflation Data: This period marked Powell’s first acknowledgment that the inflation data from the first quarter did not demonstrate the needed progress to start easing monetary policy.

No Immediate Rate Cuts Expected: Contrary to previous statements, Powell provided no assurances of imminent rate cuts, signalling a cautious stance amid uncertain economic indicators.

Personal Consumption Expenditures (PCE) Data: Powell discussed expectations for the PCE Price Index, noting it likely remained stable from February to March, but still above the target at 2.8% in February.

Inflation and Market Reactions: Recent hotter-than-expected Consumer Price Index (CPI) data led to market instability, with revised expectations pushing back anticipated rate cuts to possibly September.

Strong Economic Indicators: Despite high inflation, other economic indicators like robust job market data and solid retail sales suggest continued economic strength.

Comments from Fed Vice Chair: Fed Vice Chair Philip Jefferson echoed Powell’s sentiment, suggesting that if inflation remains persistent, high rates will be necessary for an extended period.

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