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On Tuesday, the Reserve Bank of New Zealand (RBNZ) released its latest Financial Stability Report, which identified slowing global growth, low dairy prices and rising house prices as risks. The central bank noted that the risks to the country’s financial system have increased in the past six months. The inflation rate is staying at 0.4%, far below the bank’s target of 2%. For this reason, the RBNZ seems to set further cuts to the official cash rate, which might help boost the exports. The New Zealand dollar has dropped to as low as $0.67580 after the announcement.
In March, the British factory output recorded its biggest annual fall in nearly three years, with the total production output decreasing by 0.4% in the first quarter of the year compared with the fourth quarter of 2015. Besides, investors remained the expectations of a cut in the Bank of England’s interest rate by the end of the year, due to concerns over the Brexit impacts on Britain’s growth. Sterling continued to go down against the strong Euro despite some minimal gains against the US dollar on Wednesday.
The US Crude Inventories fell 3.4 million barrels to as low as 540 million barrels last week, in comparison with analysts’ prediction of 714,000 barrels increase, which made oil prices to surge and reach the highest level from the beginning of the year. However, the surprise draw in crude inventories was offset on Thursday by the expected recover in Canadian oil sand crude production following disruptions to over 1 million barrels of daily production capacity due to wildfire.
In the US, the number of people filled for the state unemployment benefits hit the biggest gains in more than a year. In particular, the initial unemployment rose 17,000 to 274,000 for the week to April 30, according to the Labor Department. However, jobless claims still stayed below 300,000, a threshold associated with healthy labor market conditions, for 61 consecutive weeks. US government debt prices trimmed its losses slightly, while the US dollar gained against the basket of currencies after the data.
San Francisco Federal Reserve Bank President John Williams said on Friday that the Fed was considering whether to raise interest rates at its next meetings, with the current good economic outlook. He also stated that two to three rate increases this year definitely still made sense.
Gold prices gained on Friday after more than 1% losses the session before. However, the commodity was on track for its biggest weekly decline since March because the stronger greenback weighed on the precious metals’ appeal.
Next week’s latest employment data of Australia do not seem to change the view that the RBA will cut rates further in the coming months. The Australian economy is anticipated to add 12,500 jobs in April, down from 26,100 jobs in March. The unemployment rate is expected to reach 5.8% while wage growth is forecast to remain unchanged at 2.2%.
The market is waiting for the meeting of the Group of Seven major economies held in May 19-20. U.S. Treasury Secretary Jack Lew said on Friday that he would continue to work to support the dollar’s status as the global reserve currency as it was the definition of safety. About China, Lew indicated that he would keep pressing Beijing to reduce excess industrial capacity that is distorting the world markets.