Dollar gains as U.S. President Trump authorizes use of emergency oil stockpile after Saudi attack

Market Review - 16/09/2019  23:49GMT  

Dollar gains as U.S. President Trump authorizes use of emergency oil stockpile after Saudi attack

The greenback ended higher against majority of its peers on Monday as U.S. President Trump approved the use of emergency oil reserve after Saturday's drone attacks on Saudi Arabian oil fields.  
  
Earlier over the weekend, Reuters reported Yemen's Iran-aligned Houthi group said it attacked two plants at the heart of Saudi Arabia’s oil industry on Saturday, knocking out more than half the Kingdom's output, in a move expected to send oil prices soaring and increase tensions in the Middle East.  The attacks will cut the kingdom's output by 5.7 million barrels per day (bpd), according to a statement from state-run oil company Saudi Aramco, or more than 5% of global oil supply.  The pre-dawn strikes follow earlier cross-border attacks on Saudi oil installations and on oil tankers in Gulf waters, but these were the most brazen yet, temporarily crippling much of the nation's production capacity.  
  
Versus the Japanese yen, although dollar opened lower and dropped to an intra-day low at 107.48 in New Zealand on risk-averse buying of jpy due to weekend news that oil fields in Saudi Arabia were attacked, price erased its losses and rebounded strongly to 107.91 ahead of Asian open. The pair then briefly retreated to 107.50 at Asian open before rising to 107.93 in European morning, then ratcheted higher to session highs at 118.16 near New York close.  
  
The single currency met renewed selling at New Zealand high at 1.1091 and weakened to 1.1068 ahead of European open. Intra-day decline accelerated in European morning and price tumbled to an intra-day low at 1.0994 in New York morning on active cross-selling in euro especially vs sterling together with usd's strength.  
  
Although the British pound rose to a 7-week peak at 1.2515 (Reuters) in New Zealand, price erased its gains and dropped in tandem with euro to 1.2426 in European morning on risk-aversion before staging a rebound to 1.2468 at New York open on cross-buying in sterling especially vs euro. However, the pair then fell to session lows of 1.2399 on renewed no-deal Brexit concern after Luxembourg Prime Minister, Xavier Bettel, said the gap between British and Europe on Brexit remained far apart before recovering to 1.2430 near New York close.  
  
Reuters reported talks between Britain and the European Union on an exit agreement will intensify, a statement from Prim Minister Boris Johnson's office said on Monday, reiterating that the British leader will not request a delay to Brexit beyond Oct. 31  "The leaders agreed that the discussions needed to intensify and that meetings would soon take place on a daily basis," a spokesman from Johnson's office said in a statement following a meeting with European Commission President Jean-Claude Juncker.  "It was agreed that talks should also take place at a political level between Michel Barnier and the Brexit Secretary, and conversations would also continue between President Juncker and the Prime Minister."  
  
In other news, Reuters reported the divergence of views at the top of the European Central Bank about restarting its bond buying programme is a normal aspect of decision making and shouldn't be hidden, the ECB's chief economist Philip Lane said on Monday.  "It is natural, every central banker bank I know has a range of views at the moment," Lane, who acts as the ECB's chief economist, said at an event at Bloomberg in London.  "It would be fake to suppress that there is a range of views".  The ECB cut rates deeper into negative territory last week and promised bond purchases with no end-date in a bid to reverse the renewed slow down in the euro zone's economy nearly a decade after the bloc's debt crisis.  
  
Data to be released on Tuesday:  
  
New Zealand Westpac consumer survey, GDT price index, China house prices, Australia home price index, Germany ZEW economic sentiment, ZEW current condition, EU ZEW economic sentiment, Canada manufacturing sales, and U.S. redbook, industrial production, capacity utilization, manufacturing output, NAHB housing market index.