Forex news from the European morning session - 16 September 2019
Headlines:
- Aramco said to be less optimistic on speed of output recovery
- US secretary of energy: Iran attacked Saudi Arabia
- Saudi Aramco's full return to normal oil production volumes reportedly 'may take months'
- Bond yields extend fall on the session
- ECB's Stournaras: Lagarde will probably keep stimulus going
- SNB total sight deposits w.e. 13 September CHF 592.4 bn vs CHF 591.6 bn prior
- OPEC's Barkindo: Saudi Arabia has ample supplies in its inventories
- Russia's Novak: There is enough stockpiles to cover shortfall from Saudi Arabia
- Brexit: Boris Johnson reportedly set to reject any delay offer ahead of talks with Juncker today
Markets:
- JPY leads, GBP lags on the day
- European equities lower; E-minis down 0.4%
- US 10-year yields down 6.3 bps to 1.83%
- Gold up 1.1% to $1,504.50
- WTI up 9.8% to $60.22
- Bitcoin up 0.4% to $10,308
Oil continues to be the main story as investors and traders continue to digest the aftermath of the weekend attacks that wiped out half of Saudi Arabia's oil output capabilities.
There was a bit of calm as Saudi Arabia and OPEC+ initially eased fears of a major supply disruption, allowing for oil prices to recede a little with Brent falling to $64.75.
But later on in the session, reports of a possible prolonged disruption to output before returning to 'normal' helped saw oil gain as tensions in the Middle East remain high. Brent is back up to $66.70 now with WTI crude oil also above $60.00 currently.
With heightened geopolitical tensions in the region, risk sentiment remained on the softer side as equities stayed weaker overall alongside a further retreat in bond yields during the European morning. That helped to see USD/JPY fall to 107.70 levels from 107.93 earlier.
Meanwhile, the pound stayed weak as no-deal Brexit fears start to reignite amid talk of Boris Johnson not looking to abide by the extension law. Cable fell after testing the 100-day moving average just above 1.2500 to lows of 1.2426 and has been holding weaker since.
The euro also isn't helped by the inability to hold a break above 1.1100 against the dollar last week as fiscal talk is starting to grow stale at this point without any follow-up action. EUR/USD slipped from 1.1070 to a low of 1.1028 during the session.
Looking ahead, expect oil to remain the major story as markets keep their focus on heightened geopolitical tensions in the Middle East. The slump in China's August industrial production - weakest annual pace in 17 ½ years - may have gone unnoticed but if anything else, it accentuates the pain the global economy will feel amid the jump in oil prices.
