Uncertainty Keeps Markets in Check [Video]

Crude oil retreated somewhat this morning, dipping by 1% but remained at elevated levels as investors digested the escalation of tensions in the Middle East following the drone attack on Saudi oil production over the weekend. Today, we expect markets to follow a cautious tone with investors focusing on the Middle East front. 

 

Oil Prices to Remain Supported

Oil prices remain supported after Saudi Arabia announced that the hits on their refineries caused more damage than expected. In any case, the information about when the oil production will be back to normal levels is conflicting and that is why the uncertainty around it keeps oil prices elevated and may, in fact, push them even higher. 

The attacks made it clear that that global oil supply is vulnerable to only a few drones supposedly handled by "rebels" out of Yemen (or maybe Iran), but I think it is important to also ask ourselves who is benefitting from this situation. The answer may not be so straightforward as the current situation also aligns with the Aramco IPO that needed an oil price at $80 which could have never been reached if it weren’t for these attacks… Just some food for thought.

 

Is Trump Ready to Go to War?

While Donald Trump is firmly agreeing with Pompeo that Iran is the culprit behind the attacks, Hu XiJin also begs the question on Twitter, why would Iran do that, and why do people always believe that leaders of the other countries would be stupid? Iran is supported by Russia and China, so geopolitically this whole incident is one of massive significance - one that could keep risk markets depressed.

 

All Eyes on the Fed 

Global risk markets are halting awaiting what the Fed will do tomorrow, as this puts it in a very tricky situation. Also, many parallels to the year 2017 do cast a big shadow on a possible bigger recession or crisis ahead, IF the same patterns repeat themselves as they did little over 10 years ago. 

 

Forex Preview: AUD Plummets, Dollar Remains Supported

Elsewhere, the AUD remained subdued as the latest RBA Minutes disappointed while a surge in oil prices pushed the CAD and NOK higher. Meanwhile, the dollar remained supported after the U.S. Trade Representative’s office said on Monday that deputy-level talks between the U.S. and China are set to start in Washington on Thursday. The greenback is also supported by a broader risk-off tone and a reduced expectation of a heavily dovish fed tomorrow. The EUR is giving into USD strength with no signs of own strength presently

 

Gold Prices in Fed Outlook, BTC Flat

Spot gold is not moving much, slightly below the $1,500 mark awaiting the next wave of risk behaviour. XAU/USD will remain muted as investors wait for the FOMC to announce future monetary policy. Market participants have already priced in a much anticipated 0.25% rate cut. Elsewhere, BTC remained subdued losing 1% as of 9:25 GMT this morning. Crypto traders will be closely monitoring India government’s efforts to push for new legislation that will ban cryptocurrencies and impose sanctions for any dealings involving crypto assets.