Financial markets seem to have pressed the snooze bottom on Tuesday and are not willing to wake up until Wednesday when the Bank of Japan and the Federal Reserve release their latest monetary policy decisions.
The strong rebound in European equities on Monday was mainly supported
by a strong rally in oil prices, but even this catalyst doesn’t seem to be in
play today.
The same source of information which sent oil more than 2% higher at
some point yesterday is dragging prices today. Comments from Venezuelan
President Nicolas Maduro on Sunday that OPEC and non-OPEC countries were close
to reaching a deal to stabilise oil markets were offset by his Oil Minister
Eulogio Del Pino who said global oil supply needs to fall by about a tenth if
it is to match consumption.
The troubled economy has been calling an oil deal for years, but
unfortunately these calls were falling on deaf ears, and this could be the case
when OPEC and non-OPEC members meet on the sideline of the International Energy
Forum next week, unless Saudis and Iranians decide to get along.
On the economic data front, German producer prices fell back into
deflationary territory in August after rising for the past 4 months. The -0.1%
drop in PPI was led by energy prices which fell 5.5% on the year. Excluding
energy, PPI fell 0.3% from Aug 2015 and remained unchanged from July.
Currencies are also holding to its narrow trading ranges given traders’
hesitancy to take any risk ahead of the major central banks meetings.
Hussein Sayed, Chief Market Strategist at FXTM
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