The market has been favoring risk-correlated assets over the past few weeks. The breakdown at Doha meeting and the global growth warning from IMF had little impact on risk sentiment.
A broad-based rally in commodity market was the theme last night. Crude oil hits $42.8 high on its upward trend and the main driver was Kuwait’s oil workers strike pushing its production down 60%, temporarily reducing the same amount of oil from the market that the world is overproducing each day. Following the API data release indicating build up of another 310 mln barrels in inventory and Kuwait’s oil workers strike ending, Oil has pulled back by 2%.
USD continued to be under pressure overnight, as a potential slowdown in its property market was seen with housing starts dropping to 1.09m annualized rate by 8.8% in March and Building permits down 7.7% to 1-year low. Commodity currencies were the big winners. AUD, NZD and CAD were all lifted by the positive risk environment, and the market moved away from safe haven JPY.
Copper extended its rally for the third day, reaching a three-week high. A weaker dollar provided main support to this upward move, which makes dollar-denominated copper cheaper to buy for holders of other currencies. As copper is mainly used in manufacturing and other applications, its price is heavily related to China. Some positive data came from China recently also convinced investors to look more optimistically at Chinese economic growth.
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