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Investor Attention Shifted To ECB Meeting

Today, on Thursday, investor attention shifted to a speech by Mario Draghi, ECB president. Taking into account the recent dynamics of the euro, it can be assumed that investors obviously expect some strengthening in the rhetoric towards tightening of EU monetary policy, and surely investors anticipate more details in regard to cutting the quantitative easing program. Currently all statements made by the ECB president and other ECB members will be deemed in the context of potential changes at the upcoming meeting, which is scheduled for October 26. And that will be a major driver which will continue to push the euro up.

Furthermore, it is worth mentioning the FOMC minutes released yesterday. As expected, no new data was published, this is probably why markets are found to stick to the existing scenario, i.e. the rate will be raised for the third time in this year's December, as it was announced earlier. In the light of this, the US dollar, with no new drivers, is experiencing difficulties. Nevertheless, quotes may gain another momentum tomorrow following the releases on retail sales and inflation.

The Australian dollar has been rising since morning amid an unexpected increase in inflation expectations. According to the data, consumers and businesses are anticipating that inflation will reach 4.3% in the upcoming 12 months, but a month prior to that this measure did not exceed 3.8%. Public opinion in this regard drastically differs from the position of the Reserve Bank of Australia.

AUD/USD today has reached the resistance at 0.7800. However, on the whole the movement looks like a correction. To proceed with ascending dynamics, the Aussie needs to go above a high at 0.7874.

Yesterday we discussed the OPEC report. It was rather good. The cartel forecast a strengthening in demand growth and a decrease in supplies from non-OPEC members. However, this positive picture was spoilt by the statistics on oil inventories from the American Petroleum Institute. Oil reserves increased dramatically, by slightly over 3 million barrels, meanwhile analysts were expecting a decrease. And of course markets reacted to an ambiguous statement by the OPEC head, who threatened to apply more drastic measures. These words are deemed not as a precaution but as words of helplessness.

Furthermore, a report was released today from the International Energy Agency.

According to the IEA, three quarters out of four in 2018 will be roughly balanced, using an assumption of unchanged OPEC production, and based on normal weather conditions.

On the whole, oil demand and supply in 2018 is expected to grow by about the same volume, which will stimulate oil price hikes.

The data in general can be interpreted as neutral. And of course today we are anticipating data on reserves from the Ministry of Energy.

Despite the latest news, Brent oil keeps trading within the same range, below the resistance at 57.40 and support at 55.10. It is likely that the end of this trading week will be marked within these levels.

Today, the strengthening of the ruble is stimulated by hyped demand for federal debt bonds (OFZ); the RGBI went beyond 140.4 points. Also, the ruble is supported by the upcoming taxation period which starts on October 16. Furthermore, it is worth noting that on Wednesday the Ministry of Finance issued bonds worth 30 billion rubles. The Ministry fulfilled the whole volume it had issued, whereas demand exceeded supply considerably for both of the floats. In this regard, the Ministry was backed up by demand in the secondary market of federal debt bonds (OFZ). The RGBI rose above 140 points.

The range between 56.7 and 58.5 in the USD/RUB currency pair is current in the short term, at least till the end of October. However, this trend may change by the end of the year, with a target of rising towards the 60 rubles per dollar area.

Ivan Kapustyanskiy, equity analyst at Forex Optimum

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