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.
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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.
Sayed is chief market Strategist at FXTM
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