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Australian Dollar Re-strengthens

According to data published yesterday, industrial production in the US (which includes values from the manufacturing industry) in the public services sector fell by 0.6% in comparison with February, taking into account the correction for seasonal fluctuations. The market expected the value to fall by 0.4%. This disappointing stat has increased the continued pressure on the dollar, which was on the edge of reaching a new maximum against other currency pairs, unseen for many years.

Yesterday the bank of Canada convened and, as expected, they left the interest rate unchanged at 0.75%. According to a statement, a renewal of economic growth is expected in the second half of the year, since the price of oil is beginning to stabilize. According to their forecast, Canada’s GDP will grow by 1.9% in 2015.

The American/Canadian dollar pair has laid the way to 1.25 by hitting 1.22 upon the central bank’s news. Furthermore, it’s not worth ignoring the possibility for a Canadian relaxation of monetary policy this year if macroeconomic statistics significantly worsen.

Data for the Australian labor market was published today. Job creation in March increased substantially more than expected and unemployment was down to 6.1%: the lowest since December 2014.

The labor market situation’s improvement and also the indication of growth in retail sales and granting of building permission is casting doubt over the supposition that the Australian central bank will drop interest rates in May. However, it’s still too early to say that the economy is back on track. The price of iron ore, which Australia exports large volumes of to China, Japan and South Korea, has fallen; this has dealt a serious blow to Australia’s revenues. Over time, the fall in the price of iron ore will have an effect on the profit of companies, the revenues of the Australian government and households. Nevertheless, today’s strong labor market data has secured the strengthening of the Aussie/Yankee pair from 0.7674 to 0.7777.

Data from OPEC’s monthly report indicates that the sharp growth in the supply of oil in the USA will end in 2015 due to a fall in the number of active drilling rigs, a number which decreased by 238 to 1,110 in March. This number decreased even more significantly in February, by 335, OPEC stated, quoting data from Baker Hughes.

The US’ oil production in Q2 of 2015 will grow by around 13.65 million barrels a day and then will stabilize. In the second half of this year, OPEC expects that the supply of US oil will start to decrease. OPEC also forecast a noticeable growth of demand for the cartel’s oil, of approximately up to 29.3 million barrels a day. At the same time, oil extraction outside of OPEC will fall by around 165,000 a day. OPEC’s forecast for this year’s world oil demand remains unchanged at 1.17 million barrels a day.

Yesterday’s US Department of Energy’s data showed a slowing of the growth in reserves: indicating a growth of 1.294 million barrels against the expected growth of 3.6 million barrels in April. At the moment of writing this review, a barrel of Brent crude costs 62.44 dollars.

Today it’s also worth having a look at the amount of permissions granted for construction, the number of new requests for unemployment benefit in the USA and also the Fed’s production index for Philadelphia. Other than this, FOMC members Lockhart, Mester, Rosengren and Fisher will give speeches.

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