Oil Markets
Oil prices have remained firm in Asia as a couple of additional narratives are forming
Besides Saudi Arabia and Russia ruling out any expeditious supply increases at the Algeria meeting and some spillover from Saudi comments last week that prompt Brent trading above $ 80 is not a huge concern.
And while sentiment is securely buttressed by Iran sanction, the question we have is not so much the case of whether OPEC and Non-OPEC are not offering up a concession to counter the expected supply drop from Iran sanctions. But even if they wanted to ramp up production, could they physically deliver near-term supplies to tame this raging Oil bull ??
If OPEC is physically unable to ramp up production, then Oil prices do indeed have much further to run as this will be viewed as an extremely bullish signal for near-term prices.
Brent continues to lead the charge and while WTI is by no means a hesitant follower, but current price action does suggest US crude is capturing less support from the OPEC weekend news and could be held up by the expected real drag associated with seasonal US refinery maintenance.
Currencies
Australian Dollar
The Australian dollar continues to sag on more pronounced selling of AUDNZD. Indeed, the RBA’s half glass full approach to monetary policy could be contrasted against a less dovish lean from the RBNZ after a stellar NZD GDP print last week. Also, copper prices have been trading lower today as hard commodities, in general, are trading softer given the uncertainty over US-China trade discussion, which is also weighing on Aussie sentiment.
Japanese Yen
Very active day on JPY with Tokyo back from a holiday. The Tokyo fix registered in at 112.95, but with only a minimum retracement from the intersession high of 112.98, the USDJPY looks poised to test 113.00 on the greenback nascent recovery ahead of the FOMC.
Euro
Despite a lot of discussion about German Bund yields extending up to .51 bps, the Euro has a traded offered most to the Asia session as a good case for a hawkish FOMC is developing after several Fed members have recently dialled up the rate hike banter but none more so significant that Lael Brainard.
Indian Rupee
Indian Rupee has fallen short of breaching the 73 level as the market awaits some response from the RBI on the intervention front. But with Oil prices looking set to test higher, it’s only a matter of time before 73 gives way. As whatever measure the RBI will take will be viewed as a day late and a dollar short
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