The European Central Bank (ECB) will have to be prudent to gradually adjust its monetary stimulus to the economic recovery, said Mario Draghi, the president of the ECB, at the ECB Forum in Sintra, Portugal.
Draghi made it clear however that the current stimulus needs to remain in place as inflation dynamics remain "more muted than one would expect."
"We can be confident that our policy is working and its full effects on inflation will gradually materialize. But for that, our policy needs to be persistent, and we need to be prudent in how we adjust its parameters to improving economic conditions," Draghi said.
He added: "The current context where global uncertainties remain elevated, there are strong grounds for prudence in the adjustment of monetary policy parameters, even when accompanying the recovery. Any adjustments to our stance have to be made gradually, and only when the improving dynamics that justify them appear sufficiently secure."
"All the signs now point to a strengthening and broadening recovery in the euro area," Draghi, said recognizing the improvements. He also argued that the inflation dynamics aren't solid enough to exit the stimulus program.
According to him, "we are still in a situation of continuing slack, and where a long period of subpar inflation translates into a slower return of inflation to our objective. Inflation dynamics are not yet durable and self-sustaining. So our monetary policy needs to be persistent”.
Oil drops below $45 on unexpected rise in US gasoline stockpiles. Gasoline inventories increased by 2.1 million barrels during the week ended June 9, while crude inventories decreased by 1.7 million barrels.That compares with analysts estimates in a Reuters poll for a 0.5 million barrel draw in gasoline stocks and a 2.7 million barrel draw in crude inventories.
Oil futures had already come under pressure following reports that showed global supply was rising. The International Energy Agency (IEA) said it expected growth in non - OPEC supply to be higher next year than growth in overall global demand. According to its monthly oil market report, for total non-OPEC production, IEA expects production to grow by 700,000 bpd this year, but the first outlook for 2018 makes sobering reading for those producers looking to restrain supply. Shale supply has pushed U.S. crude production up by about 10 percent over the last year to 9.3 million bpd.
The British pound has fallen sharply following results of the U.K. election which show the ruling Conservative party has failed to reach of a majority in the British Parliament.
PM May's ruling Conservative party won 318 seats and lost its parliamentary majority. The opposition Labour Party led by Jeremy Corbyn had 261 seats. The Scottish National Party had won 35 seats, the Liberal Democrats were at 12 and the Democratic Unionist Party had 10. According to the BBC, voter turnout was at 68.7 percent.
Cable (GBP/USD) fell from levels as high as $1.2977 on Thursday to a multi-month low of $1.2632 on Friday morning London time.
Despite the election result, U.K. leader Theresa May said she would form a new government in order to "provide certainty" and make sure the country is "safe and secure".
Speaking outside Downing Street, the prime minister confirms Brexit talks will stick to the existing timetable.
West Texas Intermediate futures dropped more than 4 percent as stockpiles of Oil in the United States rose by 3.3 million barrels last week, versus expectations for a 3.5 million-barrel drop.Gasoline stockpiles also surged and demand for the fuel fell.
U.S. crude prices plunged toward $46 a barrel today. The next potential level to watch is the March low just below $44 a barrel. This price level was struck after oil prices fell through a number of key technical levels.
The U.S. dollar fell 1.02 percent to 109.32 yen its lowest since April 21, as more economic data drove U.S. government bond yields towards critical lows. The euro lost 0.9 percent 123.25 yen.
With the Bank of Japan keeping 10-year Japanese bond yields pinned to zero, the dollar-yen exchange rate has been closely correlated for the past year with any shifts in U.S. 10-year Treasuries.
According to the Rabobank analysts, "it is worth pointing out that the US 10-year is hovering above the key technical level at 2.13 percent".
Oil prices fell on Thursday as disappointment over OPEC's production policy set in among investors. Delegates signaled the oil producer group had agreed to extend production cuts by nine months to March 2018. They also said non-OPEC producers would also carry over the deal.
Brent oil fell $2.09, or 3.9 percent, to $51.87 a barrel just before 1 p.m. ET (1700 GMT). U.S. West Texas Intermediate (WTI) crude futures were down $2.12, or 4.1 percent, at $49.24. The reserve, which now totals 687.7 million barrels, was established after the 1970s oil crisis to ensure the U.S. economy would not suffer shocks in times of tight supply.
The dollar fell to its lowest level against the yen since May 1. The currency sank 0.5 percent against the Swiss franc, falling to its lowest since Nov. 9, as talk that U.S. President Donald Trump could face the threat of impeachment boosted safe-haven assets. The greenback fell by as much as 1.35 percent against the yen, blowing through the 112 yen level to 111.57 yen.
Today's price action showed traders were losing faith in Trump's ability to push through his campaign trail promises of tax reform and fiscal stimulus. However, there was limited expectation that he would realistically face impeachment. Many financial analysts said the market was losing some faith in the likelihood of the FED raising U.S. overnight interest rates at its meeting next month. Higher rates make a country's currency more attractive to investors.
The New Zealand Dollar depreciated against its major counterparts after the Reserve Bank of New Zealand (RBNZ) held rates unchanged in May as expected. The RBNZ defied market expectations at its policy meeting on Thursday, sending the country's currency to an 11-month low.
Inflation accelerated to 2.2 percent in the quarter, well above the RBNZ's projection of 1.5 percent. The first time since 2011 inflation had reached the midpoint of the central bank's target range. The bank's consumer price index forecasts show inflation falling back to the bottom of the 1-3 percent target band next year.
The RBNZ said that monetary policy will remain accommodative for a considerable period. The RBNZ forecasts that the average official cash rate will rise in the third quarter of 2019, but the markets were seeing this happening earlier.
Crude oil inventories fell by 5.2 million barrels
Oil prices extended gains after a larger-than-expected fall in U.S. crude inventories as refineries cut output.
According to Energy Information Administration, U.S. commercial crude inventories fell by 5.2 million barrels to a total of 522.5 in the week through May 5.
Stockpiles fell by 5.8 million barrels
The American Petroleum Institute had reported on Tuesday stockpiles fell by 5.8 million barrels last week, more than the 1.8 million-barrel slide analysts predicted.Global benchmark Brent crude was up $1.57, or 3.2 percent, at $50.30 a barrel by 12:36 p.m. ET (1636 GMT). U.S. light crude oil was $1.60, or 3.5 percent, higher at $47.48 a barrel.
U.S. gasoline futures were up 3.3 percent
Gasoline demand, which has been soft in recent weeks, also rebounded strongly. U.S. gasoline futures were up 3.3 percent after the report. EIA reported gasoline stocks fell by 150,000 barrels, compared with analysts' expectations in a Reuters poll for a 538,000 barrel-drop. API had reported a build in U.S. gasoline stockpiles on Tuesday.Distillate stockpiles, which include diesel and heating oil, fell by 1.6 million barrels, versus expectations for a 1 million-barrel decline, the EIA data showed.
Saudi Arabia also limited oil production
Saudi Arabia's energy minister, Khalid al-Falih, said on Monday he expected OPEC to agree to extend an agreement to limit oil production to the end of the year or possibly longer.State-owned Saudi Aramco will reduce oil supplies to Asian customers by about 7 million barrels next month, a source told Reuters, as part of the OPEC ' agreement to reduce production. Some data from tanker tracking firm ClipperData last week showed Saudi crude oil loadings for export fell by about 670,000 barrels a day in April from October.
The U.S. dollar rose to nearly two-month highs against the yen on Tuesday. The risk appetite is improved following the French election and investors focused on monetary policy and potential Federal Reserve interest rate hikes.
The dollar was up 0.88 percent against the yen at 114.25 yen , after earlier hitting its highest level since mid-March. The euro also rose against the yen, up 0.39 percent at 124.16 yen.
“The overall outlook remains solid”
Chief market analyst at Commonwealth Foreign Exchange in Washington, Omer Esiner, said for Bloomberg that “the U.S. economy saw a marked deceleration in the first quarter, the overall outlook remains solid and the Fed is still widely expected to raise U.S. lending rates in June and likely again in September".
Chinese shares rose after a five-day selloff brought the Shanghai Composite Index to the lowest level since October. Asian stocks slipped after rallying to a two-year high on Monday. Japan’s Topix retreated from the highest level since December 2015.