Currency Markets
London currency desks are wasting little time getting into the fray as the US dollar has turned resounding bid. Some factors could have traders pressing the buy button. In the Fixed income market, yields are turning higher lending support as G-10 which is now mirroring the Emerging market tone set earlier in Asia which saw firm USD bids across a broad spectrum of EM currencies. Also, traders continue to view the US dollar as an oasis in these trying times.
The Australian Dollar
Without overanalysing the subtle shift in the statement, the bottom line is the RBA didn’t validate the markets dovish suspicion after Westpac raised mortgage rates last week. So, the predictable top side squeeze ensues triggering some tight stops. But the overall outlook for the Australian dollar remains incredibly dour. Aussie bears will waste little time putting this RBA meeting in the rear view and will continue to fade upticks
Oil Markets
A very quiet session across most asset classes today and crude was no exception.
Even though OPEC exports in August hit highwater marks for the year, but a threat tropical storms ripping through the Gulf of Mexico has forced the closure of two platforms and has U.S. Gulf Coast refineries hunkering down. The anticipated supply disruption is keeping a bid under oil markets today and could be incredibly supportive of the prompt contracts if the weather pattern intensifies.
Overall, however, Iran sanction remains the cornerstone support for Oil markets, but by any market standard, supply is very tight as refiners’ clamber to mop up any available barrels before the re-imposition of U.S. Iranian sanctions in early November. Which of course is providing the underbelly of support from prompt contracts.
But for Oil to move significantly higher amidst the contentious escalation of US-China trade war, it all comes down to how quickly the lost Iranian barrels can be replaced if at all. Let’s face it Iranian sanctions are an absolute game changer and will continue to dictate bullish market sentiment for no other reason than losing a significant OPEC oil supplier is a huge event.
With all the noise building around the trade dispute, along with unsettling economic prospects for Turkey and Argentina that will likely drag n more emerging market economies down the polished slope gold should be in demand. But with the US dollar now strengthening against not only EM currencies but far across the board, gold bears remain in complete control of the markets.