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From the Floor: USD awaits word from potential Fed chair — #SaxoStrats

   • Potential next Fed chair Powell out at 1310 GMT
   • IBEX 35 volatility continues as Catalans take to the streets
   • Mylan shares soar on generic approval
   • Crude oil prices drop despite major US inventories draw

By Michael McKenna

The dollar, as Saxo Bank head of forex strategy John Hardy said late yesterday, is in a bit of a holding pattern as investors await news of the Federal Reserve's post-Janet Yellen plans. This could provide some volatility in the early US session today as we have rumoured Yellen successor (and Federal Open Market Committee voter) Jerome Powell out speaking at 1310 GMT.

Powell, reports CNBC, has already been interviewed by President Trump for the top job although markets continue to view former Fed governor as the odds-on favourite.

According to Deutsche Bank chief economist Peter Hooper, a Powell-led fed would broadly represent "policy continuity".

Along with the Fed we have European Central Bank minutes at 1130 GMT, where investors will continue to parse central bank statements for clues as to when and how the ECB plans to shift towards policy normalisation.

Beyond the central banks, the Spanish standoff between Madrid and Barcelona continues to weigh on the country's benchmark IBEX 35 index where Saxo Bank head of equity strategy Peter Garnry reiterates his view that there is no serious support before 9,550; the IBEX 35 currently trades just shy of 10,000.

One factor, he adds, that could give investors a crucial glimpse into the broader market's appetite for Spanish assets is today's five-year note auction at 0840 GMT.


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Source: Saxo Bank 

In single shares, Garnry reports that drugmaker Mylan should be on traders' radar with shares up 16% on approval of the first generic competitor to Teva's Copaxone multiple sclerosis treatment; Teva shares are down a corresponding 15%.

Despite the jump, Garnry cautions that Mylan maintains a poor score in Saxo's equities model due to an unsatisfactory overall technical picture.

Wednesday saw the US release a major crude oil update with the Energy Information Administration reporting that inventories saw a serious drawdown last week on elevated exports.

According to Saxo Bank head of commodity strategy Ole Hansen, US exports have soared by one million barrels/day in just two weeks to reach two million b/d; the year-to-date average is 700-800,000 b/d.

Hansen expects elevated exports to continue for so long as WTI crude is deeply discounted relative to Brent, with Saxo's commodities head noting that he sees Fibonacci support in the latter coming in at $53.70/b.

Gold and silver, meanwhile, are trading in range ahead of today's central bank news.

Federal Reserve
Can Fed speculation give the dollar some direction? Photo: Shutterstock

Michael McKenna is senior editor at Saxo Bank


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