Early Morning Call: USD slips after Fed minutes

Equity market overview

APAC equity markets followed the lead of US indices and closed the session higher.

In South Korea, the Bank of Korea (BoK) raised its rate by 25 basis points (bp) to 3.25%. It also revised its 2023 CPI forecast down to 3.6% from 3.7%, and its 2023 gross domestic product (GDP) growth down to 1.7% versus 2.1% previously.

Macro overview

Yesterday, evening the Federal Open Market Committee (FOMC) released the minutes of the last meeting, held on the 1st and 2nd of November, at which it raised the Federal Funds rate by another 75 basis points to between 3.75 and 4%.

It told the markets that "a substantial majority of participants judged that a slowing in the pace of increases would soon be appropriate". The minutes noted that the smaller hikes would give policymakers a chance to evaluate the impact of the succession of rate hikes.

Last month the Bank of England (BoE) bought £19 billion worth of long-dated and index-linked gilts to stabilise financial markets. Yesterday, the BoE set operational details of its plans to start selling some of these gilts. As previously announced, sales will begin on Tuesday 29 November, and will happen on Tuesdays, Wednesdays and Fridays, giving minimum prices that it will accept before each sale.

At 9am this morning, Germany's business climate for the month of November will be released. Economists anticipate a small rise to 85, from 84.3 in October, the first increase in six months.

Earnings

Elsewhere on the equity markets, Dr. Martens lowered its core earnings margin forecast after posting 5% profit before tax for the first six months of the year.

Kingfisher's third quarter (Q3) like-for-like total sales rose by 0.2%, dragged down by the underperformance of its UK businesses, B&Q and Screwfix.

Commodities

Oil prices are down this morning, after falling more than 3% yesterday.

Yesterday's move was triggered by G7 nations debating a Russian oil price cap. A cap above the current market level, in the range of $65-$70 per barrel. Urals crude delivered to northwest Europe is trading around $62-$63 per barrel. The cap would still make it profitable for Russia to sell its oil and in this way prevent a supply shortage on the global market.

Another factor kept prices lower yesterday: gasoline stocks. EIA inventories yesterday showed a drop in crude oil stocks of 3.7 million barrels, broadly in line with API data from the previous day.

Gasoline inventories surprised traders, with 3.1 million barrel increase. Distillate stocks increased by 1.7 million barrels.