ETF Securities Research Blog

OPEC: Premature rally

It looks like OPEC has managed to orchestrate a deal to cut production, albeit past the 11th hour. Oil prices have rallied over 8% today, following a 5% decline yesterday. While momentum is likely to keep prices rising in the short-term, we doubt that the rally can be sustained as the deal requires large non-OPEC participation. Read more…

Brexit blows the UK Budget

The UK Treasury is set to miss its budget target again in 2016/17 and has no intention to return the budget to balance during this parliament. Although fiscal deficit is expected to jump to £59bn (from £39bn in March) in 2017/18, it’s a good sign that the Government is trying to offset the negative impact of Brexit and not leave monetary policy to do all the heavy lifting. Chancellor Hammond will borrow around 2.5% of GDP more than was the objective in March over the next five years. Read more…

Falsely Trumpeting Chinese currency manipulation

It is highly unlikely that President Elect Trump will officially deem China a currency manipulator when he takes office in 2017. China is a currency manipulator, but not in the way that Donald Trump thinks. The more than 6% decline in foreign exchange reserves in 2016 highlights that the Peoples Bank of China is supporting the currency rather than exacerbating its weakness to the detriment of American businesses, as Trump asserts. Read more…

French primaries, another hit to the polls

For the first time in the history of the right wing party, the French are able to have their say and vote for the Republican candidate for the presidential election in May 2017. These open primary elections happen at a time when populism is rising across the developed world. After the UK and the US, the focus is now on Europe. French political parties acknowledged the threat from the far-right chaired by Marine Le Pen. The winner of the primaries will most likely face Le Pen next year and potentially become the next president of the French Republic.

Read more…

The US Dollar: In Trump we trust

The Trump Presidency makes the chance of a rate rise in the US more likely. Unlike Brexit, the election of Trump as the US President creates greater certainty for global markets because the framework is now known: the Republicans have won and have control of both Congress and the Senate. The stalemate that has been in effect for the past six years has been broken, and Republicans will be able to enact new legislation. Moreover, Trump’s acceptance speech went a long way to calm market jitters, not only in currency markets but across asset classes. Read more…

Gasoline prices surge after Colonial pipeline explosion

An explosion in Alabama has shut down two pipelines linking the US Gulf Coast and the US East Coast on 31 October 2016, taking an estimated 2.5mb/d of petroleum product transportation capacity offline. If both of these pipelines are fully impaired, that could be as much as half the petroleum product pipeline utilisation in the US. December-delivery gasoline prices surged as much as 14%. Prices are likely to remain elevated if pipeline flow is not restored soon. Read more…