FX market outlook

FX market outlook

Posted on Monday, September 11 2017 at 8:25 am GMT+0000

Dollar gets back on feet as risk-off sentiment eases; oil jumps on potential extension of supply cut

On Monday, investors had a bit more appetite for risk in Asia, giving some support to the dollar, as North Korea celebrated the anniversary of its founding without any additional missile tests. In energy markets, oil prices showed some recovery after ministers from Saudi Arabia, Venezuela and Kazakhstan discussed the potential of extending the period of supply cuts ahead of the OPEC meeting in November.

The US was in a state of emergency during the weekend as thunderstorm Irma passed through Florida with powerful winds and turned roads into rivers, forcing the relocation of millions of people and causing serious destructive damage. However, the dollar managed to tick up during the Asian trading hours as fears over further North Korean nuclear tests eased.  The isolated regime celebrated its founding day on Saturday by honoring the experts who fired the nuclear weapon last weekend. Yet, tensions remained high on Monday after North Korea threatened that the US will pay a “due price” if it continues pushing for fresh sanctions which are expected to be voted later today.

The dollar index, which gauges the dollar’s strength against a basket of trade-weighted major currencies edged up by 0.14% to 91.49, slightly up from the 32-month low reached on Friday.

The safe-haven yen and swiss franc retreated against the dollar as risk-off sentiment was reduced, giving the dollar some room for improvement. Dollar/yen rose by 0.69% to 108.56, while dollar/swissie increased by 0.70% to 0.9509.

The gold price, which tends to gain in times of political and economic uncertainties, moved 0.84% down to $1,334.60 per ounce.

Euro/dollar extended its losses made on Friday after an attempt to break above 1.21 failed, falling to 1.2015, while pound/dollar was hovering around 1.3190.

The kiwi managed to bounce up during Asian trading after New Zealand’s electronic retail sales’ growth more than doubled on a yearly basis in August. The figure rose by 4.4% y/y compared to 2.0% seen in July.

Looking at energy markets, oil prices settled higher after the Saudi Arabian Energy Minister, Khalid al-Falih met his Venezuelan and Kazakh counterparts separately on Sunday in an effort to extend the period of oil supply cuts by at least three months beyond March 2018, which was initially agreed among OPEC members and Russia. Non-OPEC Kazakhstan agreed to limit its output, aiming for a stand-alone deal with OPEC, while OPEC member Venezuela also positively considered the option of extension. Note that OPEC members are launching their next meeting on November 30 in Vienna.

WTI crude rose by 0.80% to $47.86 per barrel, while London-based Brent was up by 0.43% at $54.01 after a deep fall on Friday when Baker Hughes drilling counts showed a marginal increase in the number of US drilling rigs.

The commodity-linked loonie gained slightly against the greenback amid increasing oil prices with dollar/loonie falling by 0.14% to 1.2135.