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Risk Appetitle Improved as Kim Offers Peace Talk; More Opposition Against Trump's Tariff Plan Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Wed Mar 07 18 00:42 ET

North Korea's offer to open denuclearization talk, together with easing concerns over US' trade barriers, lifted risk appetite. On the FX market, US dollar fell across major currencies with the DXY index losing -0.51% for the day. New Zealand dollar and Australian dollar were the best performers, soaring +0.86% and +0.85% against the greenback. The relatively better performance of kiwi over Aussie was a report suggesting that the decline in dairy price was not as big as anticipated. Commodity prices strengthened. In the energy sector, the front-month WTI and Brent crude oil contracts climbed +0.05% and +0.38% respectively. The gains were limited by the huge inventory build last week. In the precious metals complex, the benchmark Comex gold and silver contracts rose +1.18% and +2.31% respectively. The Nymex platinum and palladium contract gained +0.88% and +0.08% respectively. Wall Street climbed only mildly higher, though, with the DJIA and S&P 500 indices adding +0.04% and +0.26%, respectively.

North Korea's nuclear problem appears to have some breakthrough. According to South Korea's national security chief Chung Eui-yong, who has finished talk with Kim Jong un, the hermit kingdom signaled that it is willing to discuss with the US regarding denuclearlization. Donald Trump indicated that he believes and hopes North Korea is "sincere" to have peace talks. However, others remain skeptical over North Korea's offer.

Separately, division is getting more serious regarding Trump's proposed tariff on steel and aluminum. The latest news is that Trump's economic advisor Gary Cohn opposes the idea of the tariff. He has been discussing with US companies, in which the metals are important for production, regarding the matter. A Bloomberg report indicated that Trump believes Cohn will resign if tariffs go ahead).

On oil inventory, the industry-sponsored API estimated that US de oil inventory rose +5.661 mmb in the week ended Mar 2. Cushing stock slipped -0.79 mmb for the week. For refined oil products, gasoline stockpile dropped -4.54 mmb while distillate added +1.49 mmb. The EIA report probably shows that crude oil inventory gained +2.72 mmb. Both gasoline and distillate stockpiles are forecast to have slipped -1.2 mmb.

The focus of today is the BOC meeting. While it has been widely anticipated that the policy rate would stay unchanged at 1.25%, the central bank would caution over the Canada's future trade relations with the US, in particular Trump's recent threat of tariff imposition and NAFTA negotiations. As such, BOC would be cautious over rate hike decisions. Canada would release its foreign trade data for January with merchandize trade deficit narrowing to CAD 2.5B from 3.2B in December. Staying in North America, US trade deficit probably narrowed modestly to US$ 52.6B in January, form US$ 53.1B a month ago. Ahead of Friday's payroll report, the ADP would report its estimate of US national employment. The number of payrolls probably increased +195K in February, down from January's addition of +234K.


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