Energy prices rebounded on report of US inventory draw and the retreat of US dollar. the front-month WTI crude oil contract initially rose to 53.43 before ending the day at 53.26, up +1.78%, while the Brent contract settled at 56.46, up +1.79%. Prices of refined oil products also gained for the day. Precious metals remained firm, benefiting from USD's weakness. The benchmark Comex gold contract rose to 1165, the highest level in 3 weeks, before settling at 1163.8, up +0.29%. The silver contract also climbed to a 3-week high of 16.48 earlier in the day, before closing at 16.5, +0.87%. US dollar retreated from a 14-year high after the release of the FOMC minutes.
The industry-sponsored API estimated that US crude oil inventory plunged -7.4 mmb in the week ended December 30. The marks the biggest decline since September. However, refined oil products saw increase in stockpile with those of gasoline and distillate rising +4.25 mmb and 5.24 mmb respectively. The DOE/EIA is expected to report a -2.15 mmb decline in crude oil inventory for the week. Meanwhile, gasoline and distillate stockpiles are expected to have added +1.1 mmb and +1.79 mmb respectively.
The FOMC minutes for the December meeting unveiled that the members incorporated the assumption of a more expansionary fiscal policy in their economic growth forecasts as well as monetary policy outlook. The latter was also driven by unemployment staying below the "longer-term normal level". As noted in the minutes, the forecast for real GDP growth over the next several years was "slightly higher, on balance, largely reflecting the effects of the staff's provisional assumption that fiscal policy would be more expansionary in the coming years". It also added that "about half of the participants incorporated an assumption of more expansionary fiscal policy in their forecasts". Notwithstanding the better-than-expected employment situation, the members remained concerned about the undershooting of the natural unemployment rate. While most members judged that unemployment rate would be "only modestly below" the estimated longer-run normal rate over the next few years, "several" were worried over "a more substantial undershoot". As such, many participants "emphasized that, as the economic outlook evolved, timely adjustments to monetary policy could be required to achieve and maintain the dual mandate.
On the dataflow, US ISM New York index soared to 727.4 in December from 720.5 a month ago. Today, the ADP probably reports a 175K increase in the number of payrolls in December, down from the +216K addition in November. Challenger's job cut data would also be due. Meanwhile, the weekly initial jobless claims probably dropped to 260K in the week ended December 31, from 265K in the prior week. In Europe, the ECB minutes would be released. Recall that the Governing Council in December surprised the market by announcing tapering to its QE program. It would extend the program until December 2017 but would reduce the pace of buying to 60B euro per month from April 2017, compared with the current 80B euro. We would look for the rationale beyond the change.