Commodities and FOREX Update Week Beginning 3rd March
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News of the situation within the Ukraine has blanketed the presses with far reaching effects. At the weekend the Russian Parliament upheld Prime Minister Putin's request to allow his military forces to protect their bases in and around the Crimea Region this obviously has had a major impact on several sectors.
News out of China was not particularly positive either. With both small and large factory output showing minimal declines. HSBC's PMI index that monitors small factory output reduced from 49.5 to 48.5 and official government statistics showed the entire sector down marginally from 50.5 to 50.2. The initial explanation is down to the recent Chinese New Year and the fact that many employees had several weeks off between January and February, however there is enough speculation abound that China's growth is slowing more than expected. Only the next few months will either confirm or deny this.
Precious metals have seen a continued uptrend with positive gains at the end of last week seeing Gold up 2% to $1,321.60. This is off the back of continued growth for 2014 in the region of just under 10% keeping in line with SPDR Gold Shares which has returned 8.15% YTD. Although COMEX Gold is 28% down over 2013's returns it appears that the commodity is again being heralded as a 'Safe Haven" for investors looking to avoid the current nervousness in the markets.
Crude Oil (WTI) was up over a dollar a barrel on early trading Monday as it reached $103.79, up $1.20 over the previous Fridays close of $102.59. This shows a significant gain off of the back of the latest news from Eastern Europe as Fridays gain was a lowly $0.19. Brent Crude which determines the cost of many oil products rose $1.62 to $110.69 on the ICE exchange in London. Concerns that Russia, one of the largest energy suppliers may face economic and supply sanctions whilst it looks to resolve its issues with the new Ukrainian government will no doubt be a guiding factor. With the increased uncertainty surrounding the region, the cost of Oil and Natural Gas, of which Russia is one of the world's major exporters will continue to be subject to potential volatility, especially as the situation in Syria is yet to come any closer to a resolution.
While the USD has continued to struggle against the Euro (EUR), Pound (GBP) and Japanese Yen (JPY) due to poor US consumption and labor figures, it hasn't all been bad news for the dollar.
As concerns over Chinas growth have been voiced the USD/CNY rate has significantly changed. After sitting on an average of ¥7.00 to $1.00 for almost 30yrs last week saw ¥6.16 - $1.00. A surprising slip and good news for the US. At the start of trading in Asia on Monday, the Yen had slipped again to ¥6.15 and at time of writing had reduced further to ¥6.14. Whether further declines will materialise can only be speculated on until we have further economic data.
The Russian Ruble is also set for declines due to a decision by the Russian Central Bank to increase its lending rate from 5.5% to 7% in an attempt to curtail inflation and the risk of financial instability due to expected volatility. The Ruble was seen down 1.5% against the Dollar and 2.5% against the Euro.
Key Exchange Rates as of 3.3.2014
EUR/USD - 1.37
USD/JPY - 101.28
GBP/USD - 1.67
EUR/JPY - 133.57
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