Iron ore spot price hits fresh year-to-date low

Friday, December 11, 2015

Iron ore prices slipped to fresh year-to-date lows with the benchmark TSI 62% Fe CFR Tianjin index settling at $37.50/tonne yesterday. Set to extend losses for a ninth straight week, its longest losing streak since the financial crisis, prices for the steelmaking raw material have come under considerable pressure. It seems as if this is set to continue heading into the coming year as miners bring low cost capacity to market, putting further pressure on spot prices. With iron ore prices having lost almost 50% since the start of the year and with Chinese growth facing substantial headwinds we could see Chinese steel capacity cut back as the industry comes to terms with a softer demand outlook.

The dollar index managed to build on near term support around 97.400 yesterday as the greenback strengthened against a basket of major currencies, trading back above the 50 day MA and targeting 98.000. Activity this morning has seen the USD hold onto yesterday’s gains, with the index hovering around 97.900 early on. Investors anticipate some additional strength in the dollar index ahead of next week’s FOMC meeting, where the consensus expectation is for the US Fed to raise interest rates for the first time in over six years.

Investors will be eagerly awaiting the release of the Bank of England’s inflation outlook for the next twelve months, which could offer some hints of when policymakers may start considering an increase in UK rates. Over in the US the release of retail sales, PPI and the University of Michigan sentiment index will be closely watched by market participants. With the potential for a rates rise next week investors are looking for any signs of additional strength in the US economy which would see appetite for risk and confidence improve. Yesterday’s release of initial weekly jobless claims came as a surprise to many investors with claims for the week ending December 5th rising 13,000 w/w to 282K. Consensus expectations were for 270K initial claims last week and if today’s data offers up any additional surprises we could see some increased volatility as jittery investors reposition themselves ahead of Wednesday’s FOMC meeting.   

DXY struggles to recover recent losses

DXY Curncy DOLLAR INDEX SPOT 2015 12 11 08 07 36

Events for today

0930

UK

Nov

BoE/GfK Inflation Next 12 Mths

1330

US

Nov

Retail Sales

1330

US

Nov

PPI

1500

US

Dec

University of Michigan Sentiment

OE: 

Jan  Brent Crude (ICE) 

 

Jan Crude WTI (NYMEX)

Topics: DXY, Iron Ore, US Fed
More from: Kash Kamal