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Markets gauge shock from oil attacks, await Fed’s rate decision

Amid rising geo-political risks in the Middle East, Boris Johnson is under pressure to secure a Brexit deal.

Centtrip: Markets gauge shock from oil attacks, await Fed’s rate decision

The Dollar gained support and crude prices soared following the recent attack on Saudi oil facilities and a risk of a military action. Oil prices increased by 15 per cent, with Brent crude recording its highest jump in over 30 years.

The attack, which was claimed by Yemen’s anti-government Houthi rebel group, halved Saudi Arabia’s production in one weekend, raising fears of retaliation in the Middle East.

US President Donald Trump said he was sure Iran was behind the attack but stressed he did not want to go to war. Iran rejected the allegations.

US Treasuries also got a boost, with Asian equity markets losing ground overnight. However, the currency market remained calm overall as investors try to gauge the extent of the political risk.

The Euro traded at an overnight low of 1.0990 against the Dollar, having shed 0.6 per cent on Monday, 16 September. The Dollar advanced against the Japanese Yen to 108.37, pushing higher than the levels reached last week and not seen since 1 August. Investors appear to be moving towards the Yen amid political uncertainties, but towards the Dollar when things seem more serious.

The focus this week will now turn to the Federal Open Market Committee’s policy meeting tomorrow, 18 September. Futures markets are pricing in an interest rate cut of 25 basis points at almost 100 per cent. Fed chair Jerome Powell has come under increasing pressure, particularly from Trump to cut rates to ward off the risks facing the global economy and as such his rhetoric in the accompanying statement will be highly scrutinised.

Meanwhile, Boris Johnson met with European Commission President Jean Claude Juncker yesterday, which the UK prime minister described as “constructive”, before admitting that more work needed to be done.

Despite Johnson’s claim, Juncker stated that the UK was yet to make any proposals that meet the objectives if the Irish backstop. These comments came amid strong criticism from Luxembourg Prime Minister Xavier Bettel, who described Brexit as a “nightmare”.

Johnson pulled out of a joint press conference with Bettel, blaming noisy protestors. The latter stood next to an empty podium.

The PM is under scrutiny again. The Supreme Court will hear two appeals to determine whether he acted unlawfully in suspending Parliament for five weeks. Johnson refused to comment on the matter, stating he will “wait and see what the judges say” before deciding whether to recall Parliament and that he will “abide by the law”.

Today Germany will publish ZEW economic sentiment at 10:00 (GMT).

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