EIA INVENTORY REPORT DRIVES ENERGY MARKETS

Commodity traders will have a lot to consider Wednesday when the US Energy Information Administration (EIA) unveils its latest inventory data. The energy markets sunk to new lows on Tuesday, as oversupply concerns continued to weigh on investors.

Crude prices continued lower through the early morning session, with Brent futures slipping 0.3% to $45.87 a barrel. Prices are trading at seven-month lows after Libya announced that two of its major oil fields were back online.

Energy traders can expect another volatile session on Wednesday, as markets brace for the next US inventory report. The Energy Information Administration (EIA) will release its weekly crude stockpiles report at 14:00 GMT. The data series is expected to show a 2.2 million-barrel draw in crude inventories for the week ended 16 June. Inventories fell 1.7 million barrels the previous week.

On Tuesday, the American Petroleum Institute (API) said weekly inventories fell by 2.72 million barrels, following a 2.7 million-barrel build the previous week.

Currency traders will also evaluate a speech from a top central banker this morning. Bank of Japan (BOJ) Governor Haruhiko Kuroda is scheduled to speak publicly at 06:35 GMT.

In terms of economic data, the UK Office for National Statistics will unveil its latest report on public sector net borrowing, which is expected to be £7.3 billion last month.

In the North American session, the National Association of Realtors (NAR) will release a report on existing home sales, an important gauge of housing market conditions. The report is expected to show a further 0.5% drop in home sales last month, following a 2.3% decline in April.

Brent Crude

Oil prices crashed on Tuesday, reaching their lowest level of the year, as oversupply concerns drove a wedge in the market. Brent barrels settled at $45.98 on London’s ICE Futures exchange, the lowest level of the year. With the decline, crude officially entered bearish territory, which is defined as a 20% drop from a previous high. The outlook remains firmly tilted to the downside, as traders continue to assess oversupply risks.

EUR/USD

The euro showed little movement in the Tuesday session, with the EUR/USD exchange rate hovering around 1.1150. The common currency has faced several setbacks in recent sessions, not the least of which being a stronger dollar. Rangebound trading is likely to define the pair over the short term, absent of any major fundamental events.

GBP/USD

Cable has broken sharply to the downside this week, with prices falling nearly 200 pips. The outlook is further complicated by Brexit negotiations, which will dog pound sterling for the next two years. The GBP/USD was last seen trading in the low 1.2630 range. Sterling will likely slide further now that Bank of England (BOE) Governor Mark Carney has ruled out a rate hike for the time being.