Crude Oil Enters Bull Market, Fed Doves Pressure USD - US Market Open

2019-01-09 14:30:00 Justin McQueen

MARKET DEVELOPMENT – Crude Oil in Bull Market, Fed Doves Pressure US Dollar

NZD / AUD: Antipodeans are the outperformers in the G10 space the morning with risk sentiment bolstered by words of encouragement regarding a potential trade agreement between China and the US. However, hurdles remain for both currencies with NZD and AUD which have yet to gain a foothold above 0.68 and 0.72 respectively.

USD: Another raft of dovish Fed commentary has seen USD pare its early advances. Fed’s Bostic noted that the December rate hike likely lifted rates close to neutral. Alongside, this Bostic also stated that the Fed needs to take a wait-and-see approach, which had been similar rhetoric from the likes of Powell and Mester. While FOMC minutes are scheduled later today, given the notable shift in language from Fed Chair Powell last week, the minutes may be somewhat outdated, suggesting a somewhat limited reaction in major asset classes.

Crude Oil: Brent and WTI crude futures are now in a bull market having jumped 20% since the December lows. However, to provide a bit of context, prices are still 30% lower than the October peak. That said, yesterday’s drawdown in oil inventories as reported by the API, alongside, OPEC oil production falling to a 6-month low in December have been among the few catalysts to support oil.