Volatility in Oil Prices Reinforces the Growing Risks in the Global Economy

US News

Today the Federal Reserve will meet to discuss the U.S. monetary policy, with the market forecasting a 25 basis-point cut. This is expected to give the U.S. economy some insulation from current trade pressures, as well as uncertainties across the global economy.

Volatility in oil prices after attacks on key Saudi Arabian facilities over the weekend reinforces the growing risks in the global economy, though the FOMC may be reluctant to adjust views to fast-changing events. Typically, interest-rate cuts drive currencies lower, yet over the past couple of days the USD has remained relatively stable, showing that the forecasted rate cuts may have already been priced in.

However, there is a split in the market to whether this will be a one-time cut or whether further cuts are to come, any announcements to follow will be sure to show in the strength of USD. Following the rate decision, the FOMC will also release a statement around monetary policy – however, with Brexit taking up most of the headlines at the moment it’s unlikely we’ll see any substantial movements in cable.

UK News

Today UK CPI figures will be released which represents price movements by the comparison between the retail prices of a representative shopping basket of goods and services, the market will be keeping an eye out as the Bank of England uses this as a key metric on whether to raise interest rates.

In other news, yesterday marked the first day of a three-day hearing to see whether PM Boris Johnson acted lawfully and gave truthful advice to the queen. It was the ‘exceptional length’ of the prorogation that has come into question, and whether Johnson was trying to use this to silence parliament, with Lord Pannick suggesting he saw MPs as an ‘obstacle’ to further his political aims. When questioned on this, and if he did in fact mislead the Queen he opted for silence and to let the court to decide.

EUR/USD

The focus today will not only be on the forecasted rate cuts, but whether or not further rate cuts and stimulus will follow. There is a level resistance at 1.1120, and should we see rates kept on hold by the FED this is expected to be surpassed and a more positive outlook from Powell in the aftermath could lead to significant dollar strength. Yet, due to no clear consensus in the expectations for the FED’s decision we could see a move below 1.0990 which was the low of last week.

GBP/USD

After seeing the currency pair break through 1.25 last week, the last couple of days has seen GBP/USD remain below this key level as we await the CPI inflation figures, forecasted at 1.8%, any deviance to this figure could lead to some movement in the markets along with the FED’s decision.

GBPEUR

UK CPI figures should influence the currency pair, as well as any news to come out of the second day of the hearing to see whether PM Boris Johnson acted lawfully and gave truthful advice to the Queen. Yesterday, we saw Sterling rally against the Euro but was still unable to break through the 1.13 barrier.Please contact us for more info about your international payments, login or click here to register and save now.

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