New battle lines drawn in oil

We jump into the new quarter with both feet today, Friday’s US Employment Report induced volatility now behind us. It’s notable that the initial gains after the data have been partially unwound (dollar index), with the dollar weakness most prevalent against the yen, with USDJPY below the 111.50 in early European. The main mover overnight has been oil prices, the front Brent contract below the USD 38.50 level as more manoeuvring takes place ahead of the key meeting of oil producers later this month. Saudi Arabia has today stated that it will freeze output only if Iran does the same. It has previously indicated that it would let Iran reach its pre-sanctions level of output before demanding a freeze. This makes the backdrop ever more precarious ahead of the meeting in Doha later this month.

Other overnight activity has been fairly muted, with China and Hong Kong markets closed for a public holiday today. The Aussie has moved off the recent highs, down to 0.7620 into the European open ahead of the RBA policy meeting tomorrow. The market is still pricing a decent chance of a cut in rates later in the year, although the latest statement from the RBA suggested that it was in no hurry. For today, there are no major data releases for markets to get their teeth into. Overall, it’s going to be a struggle for the dollar to regain its stronger footing unless the data start moving to the positive side of expectations. Emerging market currencies, especially those that have been under pressure recently, could well continue to recover in this environment.

Did you know?

The GBP/USD pair is widely referred to as “cable”. The term dates back to the 19th century, during which the exchange rate between the U.S. dollar and the British Pound was transmitted across the Atlantic via a huge cable that ran across the ocean floor and connected the two countries.

Word of the day
"Ascending Triangle" - A bullish chart pattern that indicates trend continuation.
Pro Tip

There is no get-rich-quick formula. If someone promises you one, take a step back, and then run as far away from them as possible.

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