Summary:

• Oil prices have started off the new week on the right foot amid fights taking place in Iraq
• Palladium prices have marked their highest level since 2001 on surging demand from carmakers
• GBP is grinding higher in anticipation of May’s meetings with EU leaders, CAD underperforms as NAFTA fears overshadow a surge on the oil market
• Equities, bonds, currencies all little changed despite Merkel’s failure in the regional election in Lower Saxony

The commodity market has appeared to draw the most attention so far as both oil and palladium prices have been in the limelight. The former has opened much higher in the aftermath of clashes nearby Kirkuk (Iraq) being a by-product of the Kurdistan Regional Government’s independence referendum last month as the country is one of the biggest oil producers in the world and the Kuridsh-controlled region in the north of the country produces a chunk of Iraqi oil. Bear in mind that Kurds voted overwhelmingly for leaving Iraq, however the voting was strongly condemned by neighbors such as Iran, Turkey as well as Iraq itself. Brent prices are growing nearly 1.5% while the US grade is trading not far away and adding 1.3%, consequently the spread is still remaining much broader as it’s tended to be until then.

Elsewhere, palladium prices are upping more than 1.5% being fueled by rising demand from the automotive industry, marking their highest level since 2001. Let’s notice that palladium prices have gained almost 50% so far this year leaving its major peers such as gold, silver or platinum way behind. On the surface, one would assume that the metal’s price might be already too high compared to other precious metals but it could be erroneous thinking. Copper prices are moving up close to 3% as well which could be a consequence of higher than expected PPI in China reported over the weekend.

As far as bonds and currencies are concerned those have seen fairly muted reactions as of yet. Nonetheless, it’s interesting that the CAD is the weakest currency in the G10 basket irrespective of rising oil prices. The main cause of its underperformance could be fears over the NAFTA negotiations which are pulling in a different direction as opposed to oil prices. On the other hand, the GBP is gaining a foothold a bit being buttressed by meetings of PM Theresa May with EU leaders which are going to take place later in the day. On top of that, the greenback is going up 0.1% but it has yet to get a boost from the bond market as the US 10Y yield is trading just marginally higher (1bps at the time of writing). On the other hand, the German 10Y yield is down 1bps making traders on the EURUSD confounded, a landscape could shift when NY traders enter to the day before long.

After the victory in the federal election three weeks ago, Angela Merkal had to concede defeat on Sunday when her CDU was beaten in the regional election in Lower Saxony marking the worst fallout since 1959. The failure could potentially undercut Merkel’s position when it comes to forging a new government as she has been expected to begin coalition talks this week.

The beginning of the new week is quite calm despite some political risks which came up during the weekend in Germany and Austria. The former could be afflicted by harder coalition talks after Merkel’s failure in Lower Saxony. In turn, we had a national election in Austria where 31-year old Austrian foreign minister and a leader of the conservative Austrian People’s Party (OeVP) Sebastian Kurz declared victory for his party on Sunday as he campaigned for tougher immigration controls.

All major cryptocurrencies have had a benign beginning to the new week which means that Bitcoin (BTCUSD on xStation5 platform) is uninterruptedly hovering close to its all-time high. On the other hand, a technical view could warrant a little bit more cautiousness as a bearish engulfing was drawn during the weekend. Let’s have a look at the chart below illustrating a daily time frame of the Bitcoin price.