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On May 11, European Central Bank Vice President Guindos criticized the German governments opposition to UniCredits acquisition of Commerzbank, warning that such intervention in cross-border transactions violates the spirit of the EU single market. Guindos stated, "If governments claim to support a savings and investment union on the one hand, and then say no, we oppose this specific transaction on the other, then its difficult for them to continue arguing that they support a savings and investment union." In his final interview before the end of his eight-year term next month, Guindos said that Germanys "very fragmented banking sector" needs modernization as the country faces "enormous" economic challenges.The yield on Japans 2-year government bonds rose to 1.380%.ECB Vice President Guindos: My main concern is that the Eurozone has very limited fiscal space, while we need to increase defense spending, some countries are seeking to cope with energy price shocks, and economic growth is expected to slow. All these factors will lead to a deterioration in the fiscal situation of many countries.ECB Vice President Guindos: Another worrying issue is consumer confidence. We have already seen a decline in some key indicators. Aside from the specific factors driving up energy prices, we have sometimes underestimated their impact on consumer confidence.ECB Vice President Guindos: The market has already priced in a benign scenario where the conflict is temporary and will not lead to a recession. This is a good thing, because a significant repricing in asset markets would have very adverse effects, exacerbating the impact of the energy crisis.

WTI crude oil drifts above $80.00 amidst a US Dollar rebound and supply shortage concerns

Alina Haynes

Apr 10, 2023 14:16

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In the early hours of Monday, purchasers of WTI crude oil struggled to maintain the price above $80.70 as risk aversion and hawkish Fed forecasts bolstered the US Dollar. However, threats to Oil supplies, primarily emanating from China and OPEC+, appear to keep purchasers of black gold optimistic.

 

US Dollar Index (DXY) reverses a four-day downtrend near 102.25 despite the inability of US Treasury bond yields to recover due to recession concerns. However, US 10-year and 2-year Treasury bond yields remain under pressure near 3.37 percent and 3.95 percent, respectively. In doing so, the benchmark bond coupons extend the previous day's losses and illustrate the market's flight to protection in response to concerns of an economic decline.

 

In spite of this, the recent disappointing US data reignite concerns of a recession in the world's largest economy and challenge the optimists in the energy sector. However, the positive US Nonfarm Payrolls (NFP) data enabled Fed hawks to return to the table and renew demands for a 0.25 percentage point rate hike in May. The same constrains the value of the US dollar and stimulates demand for WTI crude oil.

 

On the other hand, geopolitical concerns surrounding China, particularly after the dragon nation's military exercises near Taiwan, combine with last week's unexpected OPEC+ production cut to keep Oil purchasers optimistic.

 

China's willingness to defend the global economy through robust monetary and fiscal easing at home also enables Oil purchasers to maintain optimism in the face of optimism among the world's largest Oil consumers.

 

The Easter Monday holiday in spot markets may limit Oil price movements, but the investors appear to be out of steam, so US inflation and Fed Minutes will be closely monitored for signs of a pullback.


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