European Open: Markets Tread Water Ahead Of Fed; Saudi Arabia; Oil; Gold

European Open: Markets Tread Water Ahead Of Fed; Saudi Arabia; Oil; Gold

MarketPulse  | Sep 17, 2019 11:53

Equity markets are mixed on Tuesday as traders continue to piece together the events in Saudi Arabia over the weekend and speculate on Wednesday’s Fed decision.

The Fed’s two day meeting starts today and the result may not be the foregone conclusion it looked even a week ago. Expectations have changed quite dramatically in recent sessions, to the point that a 50 basis point is no longer priced in at all and no change is now priced at more than 30%. A 25 basis point cut is still almost 70% priced in but the way markets are moving at the moment, this could slip further over the next 24 hours.

There have been a variety of explanations for the change in expectations, be it stronger data last week, improved risk appetite, trade war optimism and even higher inflation potential following the oil price spike. Whatever the reason, it would be an interesting move from the Fed to hold at the meeting and one that would almost certainly draw the ire of President Trump, although they must be used to that by now.

Oil stabilises and holds onto huge Monday gains

Oil prices have stabilised on Tuesday after surging at the start of the week on the back of the attacks in Saudi Arabia. We’re now seeing a significant risk premium being priced into the oil markets, not only because of the outages caused but also the prospect of further attacks and an escalation in the region.

It’s clear who the US believe is to blame for the attack, despite the Houthi rebels claiming responsibility but how they respond is yet unknown. We’ll also learn in the coming days just how quickly the Saudi’s can get lost production back online and whether stocks will be called upon to fill the void. There’s a lot of unknowns at the moment which is why we’re seeing oil holding onto these gains.

Brent Daily Chart

Brent Daily Chart

Gold has lost its mojo

It’s been a telling 24 hours for gold, which initially benefited from its safe haven status in the immediate aftermath of the Saudi attack before giving up much of the gains to end the day below $1,500. Gold has looked overbought for some time and weaknesses are starting to show, making $1,480 support look very vulnerable.

This makes the Fed decision tomorrow all the more interesting given the direction of travel of market positioning. A refusal to cut rates will be supportive for the dollar and could pull the rug from under the feet of gold, taking $1,480 with it. It may take something very dovish from the Fed to give gold its mojo back and I just don’t see it happening.

Gold Daily Chart

Gold Daily Chart

Economic Calendar

Economic Calendar

Disclaimer: This article is for general information purposes only. It is not investment advice, an inducement to trade, or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Ensure you fully understand all of the risks involved and seek independent advice if necessary. Losses can exceed investment.​

Original Post


Related Articles

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
Saving Changes


Download the App

More markets insights, more alerts, more ways to customize assets watchlists only on the App is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.