Summary:
- Crude oil sticks to its post-Trump announcement gains
- Turkish lira rallies in anticipation of an economic meeting held by Erdogan
- US 10Y yield comes back above 3%, US dollar brushes off this move giving back its previous gains
It’s been a busy morning today regardless of a class of assets you are trading. At the beginning of trading traders had to digest the yesterday’s Trump verdict regarding the Iran nuclear agreement. He chose to pull the US out of this accord underscoring that staying in there would risk an arms race in the Middle East describing the current deal “decaying and rotten”. As far as sanctions against Iran are concerned they will be reimposed after 90-day and 180-day wind-down periods when US companies will have to terminate activity there, or will face fresh economic restrictions. The two best known grades of crude oil have kept their gains thus far, and they are currently trading 2.5% higher.
In terms of currency movements we’ve witnessed a retreat in the US dollar (even as the US 10Y yield has come back above a 3% mark anew) and a tremendous increase in the Turkish lira benefiting from the President Erdogan’s announcement who decided to hold a special meeting to discuss the tumbling currency. Let us notice that the TRY had touched its record low against the USD prior to his call. Looking elsewhere it cannot miss the Scandinavian currencies placed among top movers during today’s session especially the SEK. What drove them? The simplest answer is a release of price growth calculations both by Norwegian and Swedish statisticians. However, there was no surprise in case of the Sweden’s reading whilst the Norwegian one even beat the median estimate as far as headline inflation is concerned. Thus, why is the SEK outperforming its Norwegian counterpart?
In turn, European equities have been quite calm as of yet apart from the FTSE MIB (ITA40 on xStation5) being over 1% up at the time of preparing this article. Speaking about Italy all boils down to risks related to a possible snap election as the biggest country’s parties came out against the proposal put forward by President Sergio Matterella who called on them to try to forge a government following the inconclusive election. So why have equity investors changed their mind today? It could stem from the fact that a sell-off in the local bond market halted today after a substantial move in yields on Tuesday (the 10Y yield jumped over 10bps), and in effect the Italy-Germany spread has narrowed down to below 1.3%.
The unthinkable has become the reality – the US is out of the Nuclear Deal and thus we are in a completely new paradigm on the oil market. But consequences of this controversial decision could be broader. In this analysis we address key areas of concern for the markets and analyse charts for OIL, EURUSD and DE30.
This week has not gone well for cryptocurrency traders so far, of course for those who have been betting on price rises, as major virtual currencies keep moving south. While traders from other markets have been recently zoomed in on the Iranian thread regarding the nuclear accord, crypto traders have had much less to digest. One of the most notable news came from Oracle, the world’s second largest software company, as it reportedly going to roll out blockchain-based products during the upcoming two months.
Investors’ attention is still focused on the oil market as they await response from the other participants of the Iranian Deal to the Trump’s withdrawal. Having that in mind oil traders should be cautious in the upcoming days as this commodity market may remain volatile. Today we will be served with a weekly DOE report on oil inventories. Moreover, RBNZ is expected to make its interest rate decision overnight.