The Bank of England, the problems of the ruble & NFP

3 may 2019

The Bank of England left the monetary policy parameters unchanged as we expected. Since this decision was included in the price, all the attention of traders was focused on the comments of the Central Bank and its head. The Bank of England raised its economic growth forecast (up to 1.5% of GDP growth) but warned that the situation with Brexit “darkens” the future for monetary policy. At the same time, the Members of the Monetary Policy Committee of the Bank of England support the view that the Central Bank will require a more stringent policy. However, the markets were not that impressed with such rhetoric of the Central Bank and the pound for the day suffered losses.

Today, all the attention of the markets will be focused on data on the US labor market. In view of the pause in the Fed's actions, it is the figures of the NFP that will shape the market expectations for the future actions of the Central Bank.

Recall, last month the data turned out to be quite good + 196K and the dollar buyers could breathe out with relief after the devastating February data (the NFP was only + 30K). Good numbers are also expected this time - + 180K. This figure fully coincides with the average value of the NFP over the past two years. This means that data will almost certainly differ from forecasts. The question is this number will be worse than predicted or better.

In our opinion, there are reasons to expect an excess with a “+” sign. These thoughts are pushed by numbers from ADP (on Wednesday, the data showed an increase of 275K with a forecast of 180K). The level of correlation between these indicators is low, but they still characterize, by and large, the same thing. In addition, the US GDP figures for the first quarter, albeit with some assumptions, “insist” in a positive way.

So today we will buy a dollar. Another motivation for this is the results of research by analysts JPMorgan Chase, who conducted a retrospective analysis of the dollar behavior over the past 10 years. So, in May, the dollar index grew 8 times. For the American currency, this is the strongest month of the year.

The Russian ruble showed the worst results in the foreign exchange market yesterday. So those of our readers who listen to our recommendations should have earned good money. The reasons for the current sales of the ruble on the surface - the decline in oil prices and fears of new sanctions from the US. As for the deeper, fundamental foundations, we wrote about them earlier in our previous reviews.

About the oil market. Here our readers could earn even more. Russia published data on oil production in April. The country has again failed to meet the conditions of OPEC +. And this is despite the fact that Alexander Novak. Minister of Energy of the Russian Federation, swore an oath that the country would fulfill the terms of the deal. The problem is not in additional volumes of oil that Russia releases to the market (they are insignificant, about 40-50K b / d). But that Russia is not fulfilling the agreement.

If other members of OPEC + start following a similar strategy, then in June the agreement may well not be extended. And this could potentially lead to the appearance on the market of 1.2 million b / d of additional oil supply. That, naturally, will be the strongest blow to the oil quotes. So the current decline is far from the limit. We continue to monitor the situation on the oil market. In the light of such events and market sentiments, today we will also look for points for asset sales.