• We still believe that there is some upside potential for crude oil prices, although it would be difficult to break the $60 level given the elevated amount of inventories
• USD/NOK is expected to continue to move lower as the NOK will find a strong support from rising oil prices, while the USD should retreat as the market starts to price out a June rate hike
• Precious metals are also taking advantage of the weaker dollar and gold should start recovering ($1,200 – $1,300 – next price targets)
• Although a stronger ruble should weaken nominal wage growth, Russia’s Central Bank will intervene to avoid the ruble gaining too much in order to protect its GDP
• The recent oil rebound is without doubt bolstering Russia’s economy, which is heavily dependent on this commodity
• The Russian central bank’s target of $500 million in gold and forex reserves is getting closer and currently stands in the region of $390 million
• Russia plans to gain more credibility by remove the dollar from its international exchanges. This would also offer Russia some protection against global uncertainties.

In Australia, private capital expenditure (capex) contracted 5.2%q/q in the first quarter of 2016, missing consensus for a smaller decrease of -3.5% and also below the upwardly revised figure of +1.8% in the last quarter of 2015. On a year-over-year basis capex contracted -15.4% as spending on equipment, plants and machinery slid 9.2%y/y (s.a.), while spending on buildings and structures collapsed 18.8%y/y (s.a.). Initially, AUD/USD fell sharply on the news as it hit 0.7162. However, the Aussie bounced back above the 0.72 threshold, supported by rising commodity prices. Crude oil continued to rally hard on the back of fading supply glut issues as US stockpiles dropped 4.2k over the last week, missing the forecast for a smaller reduction of 2k barrels. In London, futures rose 0.70% to $50.09 a barrel, while US futures stumbled on the $50 threshold, stabilising at around $49.90 a barrel. We still believe that there is some upside potential for crude oil prices; however it would be difficult to break the $60 level given the elevated amount of inventories.

With crude oil prices moving higher, the Norwegian krone followed the trend. USD/NOK slid 0.70% to 8.3070 after hitting 8.4065 amid growing Fed expectations for normalising short-term rates. We expect the currency pair to continue moving lower as the NOK will find a strong support from rising oil prices, while the USD should retreat as the market starts to price out a June rate hike.

Precious metals are also taking advantage of the weaker dollar as the yellow metal rose 0.39% in Tokyo. Silver was up 0.72%, while platinum jumped 1.54% and palladium surged 2.05%. Gold has reached the bottom of its medium-term range and should therefore start recovering. A strong support can be found at around the $1,200-$1,220 area, while the top of the range is at $1,300.

In the equity market, Asian regional markets were mostly trading in positive territory. In mainland China, the Shanghai and Shenzhen Composites were up 0.13% and 0.31% respectively. In Japan, the popular Nikkei 225 edged up 0.09%, while the Topix index remained unchanged. Offshore, Hong Kong’s Hang Seng edged down 0.04% and Taiwan’s TWSE traded flat (-0.02%). In Europe, equity futures are once again trading in negative territory – just like yesterday – but may turn positive following Asia’s lead. US futures are mixed.

Yann Quelenn, market analyst: Russia, gaining positive momentum: “According to a recent survey of 37 economists, the Russian economy should shrink by 1% in 2016 vs. a previously expected contraction of 2%. The recent oil rebound is undoubtedly helping the country, which is heavily dependent on this commodity. A barrel of Brent is now above 50 dollars a barrel, representing a 7-month high. The survey also indicates that inflation should remain high, around 8% y/y. Nominal wage growth has surged since the start of the year, which is adding upside pressures on consumer spending. We believe that this is a direct effect of a very weak rubble, however a newly strengthened ruble should weaken nominal wage growth. We also believe that the Russian central bank may intervene in the event of the ruble gaining too much in order to avoid damaging its GDP. Later today, Russia will disclose its gold and forex reserves for the week ending May 20. Russia’s goal of reaching $500 million is getting closer with current reserves amounting to $390 million. Russia plans to remove the dollar, as much as possible, from its international exchanges in order to gain more credibility. This would also afford Russia a certain degree of protection against global uncertainties.”—

Today traders are awaiting a final reading of Spain’s GDP figures for Q1; industrial output from Switzerland; PPI from Sweden; initial jobless claims, durable goods orders and pending home sales from the US; gold and forex reserves from Russia.