The agenda which is going to matter the most and keep downward pressure on the trading session today is the sell off in oil prices after the Doha meeting failed to agree to form an agreement. Was this any surprise given that we had reports that Iranians officials had no desire to go to such a gathering? Of course no. The Saudis are not going to back off from producing more oil and will defend their oil share no matter what. On the other hand, Iranian are interested to recover the revenue which was lost due to sanctions. .
The brutal sell off, which we have seen over in Asia is the direct result of the heavy punishment for oil prices and it has encompassed the energy sector. Remember traders have paid close attention to the correlation between oil prices and equities and given that the talks have failed to established a production freeze in Doha, investors are not going to overlook the importance of this over in Europe.
In summary, oil prices have dropped like a rock during the Asian session and tumbled nearly over 5 percent. Commodity prices along with mining sector and energy sector may feel the pain even more during the session. Commodity exposed currencies may also feel more selling pressure today, triggering more worries among traders if we are going to see another run of January sell off..
In terms of economic news, there isn’t anything major which can triumph the Doha’s meeting event and it will remain on the center stage. Having said that, we have the FOMC member Dudley speaking today and perhaps he will reverberate the very same message what others have delivered so far which is more rate hikes will take place later this year and the economic conditions in the country do allow for this.
by Naeem Aslam