The week opened with a speech on Sunday (US time) by Federal Reserve Chairman Powell. It was a law school commencement speech, which Powell delivered remotely via video while contracting Covid late last week. Powell made no comments on the economy or politics.
The data flow was barely existent.
However, we had the Loan Prime Rate (LPR) parameters from the People’s Bank of China. LPRs play a vital role in determining loan and mortgage interest rates in China. The PBoC left the 1- and 5-year rates unchanged, as expected, at 3.45% and 3.95% respectively. The last time the 1-year rate was cut was in August last year, while the 5-year rate was cut in February this year. The People’s Bank of China is expected to continue to further ease monetary policy. One compelling reason is that Chinese banks will need more cash to buy government bonds, including the issuance of special ultra-long-term Treasury bonds that began last Friday – these bonds raise cash at purposes of building the economy (stimulus).
On the information front, a helicopter carrying Iranian President Ebrahim Raisi and Iranian Foreign Minister Hossein Amir-Abdollahian crashed in a mountainous area in Iran’s northwest East Azerbaijan region from Tehran and on the border with Azerbaijan. It took several hours to find the downed helicopter, and when found it was simply broken, burned wreckage. No one on board survived.
This potentially has implications for the price of oil. Although there is no suggestion, at least, of foul play, if this material were to surface and the blame was perhaps placed on the United States or Israel, it would constitute an escalation of a situation already tense in the Middle East. Which would, at the margin, be favorable to oil.
Separately, Saudi King Salman bin Abdulaziz will undergo a treatment program at Al Salam Palace in Jeddah for lung inflammation. Saudi Arabia’s Crown Prince Mohammed bin Salman was expected in Japan from May 20 to 23. He postponed his trip. He was to meet Prime Minister Fumio Kishida.
The price of oil increased today with the exit of these two products from the Middle East.
Gold, silver and copper surged. Gold at a record high.
USD/JPY rose towards 156.00 and fell again from there. Major FX was mostly limited to small ranges only.
Brent oil, small opening gap to start the week:
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