Good morning,
DXZ9 97.625 +0.101 GCZ9 1488.8 -7.0 ESZ9 3033.25 -3.00 CLX9 55.09 -0.72
Today begins the 2 day Federal Reserve meeting on monetary policy, where a reduction of 25 basis points to short term rates is the general expectation. Equity markets, while a touch softer this morning, continue to march higher, led by continued trade optimism and overall hope for the economy. The gold market is rotating down today, as a US cut is priced in, and the belief there could be a signal of a pause to the cuts. Gold still remains within spitting distance of $1500, and it wouldn’t take much to pop back above.
The dollar is recovering a bit today, following yesterday’s decline. As the Brexit discussions continue, the most interesting topic for FX yesterday was the election in Argentina, as the socialist party defeated Macri, but not by as much as was expected. The new government takes power on Dec 10. In front of the election, the peso has devalued by 70%, and the government has issued currency controls to attempt to protect the peso. In the past, you could convert $10k a month from pesos to dollars, and now that has been reduced to $200 a month. Inflation is the big concern here, and the fear is that it will get worse. This will have a huge impact on the ag producers, who collect dollars for their goods. The concern comes from when they need to buy inputs for the next season, which they pay for in pesos.
Oil futures have slipped back below $55 in this morning’s trade. It has been a fairly lethargic range trade the past few sessions, as the oil market waits for the next event to take place, whether that be another incident in the Middle East or news about production levels, specifically form OPEC+. The decline this morning is thought to be led by anticipation of seeing another stock build in the data from last week for US crude.
In the grain markets, corn and soybeans are lower this morning, as yesterday afternoon’s crop progress data showed harvest continuing to move along, yet still behind last year and the yearly averages. The could be some pressure on the grains coming from South America, where producers want to move inventory ahead of any potential taxation or other legislative measures form the new from the new government in Argentina. The wheat market has a small bid today, ahead of another purchase tender from Egypt. Last week, 405k tons of wheat was purchased from the Black Sea and France. More of the same is expected today, especially as European wheat exports are up this year, and Black Sea exports are down a touch. Hope always remains the US can work its way into the mix.
Other commodities were higher yesterday with the decline in the dollar. Some short covering took place in sugar and coffee yesterday. There are some dry areas of the coffee growing region that is keeping traders on edge. Sugar saw a big increase to the spec short positioning, as reported in the COT report released last Friday, and some modest covering seemed to be in order there. Cotton futures had a slight correction lower in yesterday’s trade, but have resumed higher today. Trade progress is thought to be keeping a bid in the cotton market.
Most of the market’s focus for the next couple of days will be on the decision from the Fed, and the press conference that follows. Thursday is month end, which could bring some profit taking or window dressing into the market. On Friday, a fresh look at the US employment picture comes, where an increase of 85k is expected for nonfarm payrolls, compared to +136k last month. The Unemployment Rate is expected to uptick to 3.6% from 3.5%. A precursor to this data comes tomorrow, with the ADP Employment Index.
Technical Moving Averages:
Product 50 day 100 day 200 day
SX9 897.00 899.75 909.75
CZ9 377.00 404.25 401.00
WZ9 489.25 503.00 502.75
KWZ9 408.25 435.50 461.50
MWZ9 525.00 537.25 554.75
SMZ9 301.1 307.8 312.5
BOZ9 29.51 29.09 29.46
CLZ9 55.17 55.54 57.35
GCZ9 1511.8 1471.3 1396.4
LHZ9 66.425 68.890 71.445
LCZ9 108.160 109.710 113.655
KCZ9 98.05 101.95 103.80
CCZ9 2381 2412 2374
CTZ9 61.16 62.39 67.82
SBH0 12.34 12.76 13.28
JOF0 102.90 105.60 113.45
HGZ9 260.45 263.80 273.85
Thanks,
Mike
Michael Clifford
141 W Jackson Boulevard
Ste 1065
Chicago, IL 60604
Trean Group, LLC
312-604-6404