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    European Session – Sterling tumbles on Brexit fears, oil below $29 as Doha deal underwhelms

    Oil-related news headlines today set the tone in the markets, giving a bit of a risk off mood. Oil prices fell below the key $30 a barrel again on the announcement of a production freeze by Saudi Arabia, Russia, Venezuela and Qatar after reaching a preliminary deal at a meeting in Doha today. The freeze would be applied to January output levels, which are already near record highs. Investors were disappointed with the agreement as they expected more (such as cuts to production). Also the deal is contingent on other oil producers joining in. Meanwhile, Iran was not included in the deal and this oil producer is expected to raise production to 300-400,000 barrels a day this year following a recent lifting of sanctions on the country.

    Oil erased all of its earlier gains which took it to a high of $31.46 and fell below $29.

    The euro was lifted against the dollar to an early session high of $1.1192 on the back of the oil sell-off as risk appetite faded and the single currency’s safe haven status returned. However, gains were reversed and the euro fell back down to $1.1123 in late session trading.

    Sterling was in freefall today, falling below $1.43 against the dollar. This was partly due to disappointing UK inflation data and partly due to Brexit concerns. While the headline annual CPI figure showed inflation edged higher in January, the monthly and core numbers disappointed. CPI rose by 0.3% on a yearly basis but fell 0.8% month-on month, more than forecast. Core CPI dropped 1.0% month-on-month and fell to 1.2% on a year-on-year basis. Meanwhile, a near term risk event for the pound will be Wednesday’s UK employment report.

    US data consisted of the Empire State manufacturing index which came in at -16.64 for February, missing expectations, and remaining in contraction for a seventh straight month. Other data showed US home builder sentiment slipped in February as shown by the NAHB. The index fell 3 points to 58, from an upwardly-revised 61 in January, missing forecasts for a reading of 59.

    The dollar index was up by over one percent today and the greenback’s strength was evident against the British pound, the Canadian dollar and the Australian dollar. Against the yen, the dollar was trading below the 114 yen level as safe haven demand buoyed the Japanese currency today.

    The New Zealand dollar tumbled today due to the US dollar strength. Meanwhile, the Global Dairy Trade Auction price index was down -2.8% versus -7.4% prior.

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