Review of trades: geopolitics multiplied by the elements – a formula for success for the ruble and oil

States are hungry for sanctions, but China and Russia are strongly opposed

The idea of ​​the Americans to strangle the sanctions of all those who conduct business with North Korea did not inspire the two largest powers in this region. Is it any wonder, given that China accounts for 85% of all goods and services imported into the country? The role of Russia in North Korean imports is much more modest – only 2.3%, but it has its own mainly political motives in this regard. In general, the idea of ​​Washington with the total isolation of Pyongyang is likely to fail, but investors are still panicking: if the US manages to insist on its own, many Chinese enterprises will be under sanctions, which will increase pressure on the largest economy in the region, which has long been dampening turns. In addition, there is a risk that such a dissonance in the world community will inspire North Korea to even more aggressive attacks. In particular, South Korean intelligence already reports that the militant neighbor is preparing new launches of intercontinental ballistic missiles.

The situation around North Korea maintains in the markets an easy anti-risk attitude, which, in turn, feeds the demand for gold and US state. bonds, and also strengthens bearish pressure on stock indices. Gold yesterday updated its annual highs at 1344.44 and today in the morning it consolidates in a new range with the lower border around 1330. Shares are falling across Asia from Tokyo to Sydney. So, the Australian S & P / ASX 200 lost 0.4% due to a fall in the financial sector, Topix in Japan fell by 0.3%, and Hang Seng – by 1%. The American DJIA yesterday fell in price by 234 points, having survived the most massive intraday drop for the last month. Yield on the 10-year state. US bonds fell by 2.072%.

The yen and the ruble sweep everything in its path

Anti-risk sentiment, falling profitability in the US and ultra-soft comments from Fed officials – what else do the bulls want for the yen? The dollar / yen closed yesterday at 108.80, the low of the end of April this year. Today in the morning the pair tested the level of 108.49 and is not going to turn off the course. The European session does not publish anything that could distract markets, so the dynamics will be determined by subjective perceptions and moods. In the evening, the Bank of Canada will meet, and the Fed will publish the Beige Book, which, however, is unlikely to change anything in the Fed’s monetary policy forecasts after yesterday’s “pigeon song” Lael Brainard and Neela Kashkari.

Low inflation is a problem and, perhaps, an excuse to postpone rate hikes. This is the message the markets heard in the comments of Ms. Brainard, who stated that the Central Bank needs to know exactly what inflation is moving steadily towards the target level. Investors already strongly doubt that the regulator will go to the third rate increase this year, and her words only gave confidence to those who expect a long pause in the process of tightening.

The ruble is by no means a defensive asset, but yesterday he too was lucky to get out into the leaders of growth. The Russian currency has risen in price by 0.5% against the dollar and 0.4% against the euro. Moreover, today at the MICEX premarket, the Russian currency continues to gain strength, moving confidently towards the September highs. The dollar / ruble is now trading at the level of 57.45, and for one euro it is 68.44 rubles. Behind this dynamics there are two key factors: oil and speculative interest. On the one hand, the 53.00 breakthrough in Brent crude has become a decisive catalyst for the ruble and is likely to continue to feed its upward momentum in the short term. On the other hand, a drop in profitability in the US increases the attractiveness of the ruble as a speculative asset. In addition, the report released yesterday showed a slowdown in annual inflation in Russia to 3.3%, this is the lowest value in the history of statistics and the reason to buy ruble assets. From a technical point of view, the nearest resistance in the dollar / ruble pair is in the area of ​​57.30, however the break below 57.00 will clear the currency to 56.00 and to the annual lows in the area of ​​55.60. However, all this is possible only in case of further growth in oil prices and a positive market sentiment regarding risky assets.

Two hurricanes, two troubles

Texas, badly battered by Hurricane Harvey, is gradually returning to life and pushing up oil prices. There are two reasons for this: on the one hand, the refineries restore the production capacities lost during the disaster, which leads to an increase in demand for crude oil; on the other hand – the State needs to rebuild the lost infrastructure and housing, and this will require more fuel. Petrol and other refined products are cheaper, however this process will be short-lived, especially if a new trouble comes up named Irma. This hurricane is approaching the shores of Florida and it has already been given the fifth, highest category. Experts note that the wind speed at the epicenter is already 300 km / h and will continue to grow, as the element is still gaining momentum. With an unfavorable combination of circumstances, Irma will reach the southeastern coast of the United States by the weekend, therefore a state of emergency has already been declared in Florida and in the island territories of the United States. People are evacuated and buying up everything that gets in their field of vision, including fuel. In Florida, there are almost no oil industry enterprises, so this storm will mainly affect demand, which is growing now and will grow after the hurricane, when people start building their homes, lost property and restore infrastructure. These considerations helped Brent crude to finish the day above $ 53.00 a barrel for the first time since May 25 of this year. The WTI grade also appreciated significantly, up to 48.63, although its long-term picture looks more modest.

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