Daily Market Update

U.S. Dollar dominant as chaos ensues in Mid-East relations

September 17, 2019

The U.S. Dollar continues its ongoing rise based on the risk-averse reaction throughout the world to the attack on one of the world’s largest oil facilities in Saudi Arabia perpetrated by Iranian-backed rebels in Yemen.

Overview

Clearly, more tensions in the Middle East are causing a spike in oil futures as the potential for conflict only convinces investors that supplies could become compromised, thus a rise in prices for gasoline that will affect everything from airlines to truckers. As of now, the buck is playing a safe-haven role and could further benefit with costlier oil as most contracts are denominated in USD.

Tomorrow, we get the Federal Reserve’s decision whether to cut further into the interest rate, currently at 2.25%. recent speeches and statements from various Fed officials have shown that there is no cohesion and actual disagreement in monetary policy. Hawks and doves might go at it and with the uncertainty of markets, there is a chance for a surprise no-cut scenario. The most likely situation is that a 25-basis points slash occurs, but they refrain from cutting any more this year. Dollar flows might get impacted more by how Fed Chairman Jerome Powell sounds in his press conference.

 

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

 

AUD

The Australian and New Zealand dollar are both the worst performers among the majors overnight, crumbling to the idea that trade dynamics might be affected in a negative way by a conflict in the Gulf. This adds to already edgy investors who see the Oceanic economies as vulnerable to any problems China may have.

According to minutes from the Reserve Bank of Australia, officials are looking to cut interest rates may be as soon as October. Naturally, the Aussie is dragging its neighbor Kiwi down with it. We think that a turnaround is possible next year, but we do expect the RBA and RBNZ to cut rates if the Fed keeps doing so.

GBP

Pound Sterling could be at the cusp of surging if indeed Prime Minister Boris Johnson is able to reveal any progress to his cabinet after his meeting with European Union Commission President Jean-Claude Juncker. Additionally, courts in Edinburgh and London are weighing the legality and constitutionality of the Prime Minister’s move to shut Parliament.

If it is determined that he was wrong, the legislative body could be recalled immediately. The prospect of such an event only improves the odds of finding a delay or elections that will ease fears of what effects Brexit could bring. EU officials and Luxembourg’s Prime Minister Xavier Bettel have displayed sincerity in saying the situation is a “nightmare.”

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