It was a relatively steady day across global financial markets yesterday despite the escalation in Geo-Political tension brought about by the US pulling out of the Iran nuclear deal and reinstating previous sanctions. Not unexpectedly Oil once again moved strongly to the topside, assisted by lower than expected inventories in the US, WTI is trading up around $71.50 a barrel for the first time since 2104 as we enter the Asian session. The US equity markets finished the day on the front foot and the futures are pricing in a mixed start for the Asian exchanges.
Investors will continue to focus on the Geo-political factors that are influencing the market at the moment and will be wary of any fresh reaction that could spark a downside move in risk trades and a increase in volatility across the products. As most observers will confirm, disturbing the delicate status quo of the Middle East can lead to a big chain reaction of events and investors will be very wary of the repercussions of yesterday’s announcement by President Trump.
Looking ahead to today’s trading and aside from the on-going Geo Political influences we have some significant risk events ahead from fundamental data and central bank announcements. We’ve already seen the RBNZ stick to plan and keep their rates on hold whilst remaining the only major central bank to indicate that the next move could be down. The focus now moves onto the Bank Of England’s announcement later on today. Only a few weeks ago it seemed almost certain that they would be hiking today, but a series of poor data has completely changed expectation and the market strongly expects a ‘no change’ with a 7-2 count from the MPC. Into the New York session and the key CPI data is due for release with the market expecting an increase of 0.3% for the main number and 0.2% for the Core data.