· The dollar fell while safe havens and currencies of oil-producing countries rallied on Monday, following an attack on Saudi Arabian refining facilities that disrupted global oil supply and heightened Middle East tensions.
The Canadian dollar rose 0.4% to 1.3233 per dollar. The Norwegian krone rose 0.5% to 8.9363 per dollar. Both currencies often move together with the oil price because the countries are major oil exporters.
In India, a major importer of crude, the rupee fell almost 0.7%.
The safe-haven Japanese yen and Swiss franc both firmed. The yen rose 0.3% to 107.79 per dollar and the franc rose 0.4% to $0.9883. Gold jumped by 1%.
Against a basket of currencies the dollar edged lower to 98.162.
On the Brexit front, British Prime Minister Boris Johnson’s confidence of sealing a deal to leave the European Union by Oct. 31 applied renewed pressure to the pound.
Sterling fell 0.3 from a seven-week high to hit $1.2486.
The euro was steady at $1.1073.
That added to pressure for stimulus and in offshore trade the Chinese yuan weakened 0.25% to 7.0631 per dollar.
· EUR/USD looks for direction around 1.1070, looks to data
The single currency has started the week on a neutral stance, with EUR/USD hovering around Friday’s close in the 1.070 area.
The pair is navigating the 1.1070/60 band so far on Monday, coming under some renewed selling pressure after hitting fresh tops beyond 1.1100 the figure in the wake of the ECB event in the second half of last week. This important area of resistance coincides with the short-term resistance line off June’s peak (at 1.1412).
EUR/USD levels to watch
At the moment, the pair is retreating 0.02% at 1.1069 and a breach of 1.1053 (21-day SMA) would target 1.0925 (2019 low Sep.3) en route to 1.0839 (monthly low May 11 2017). On the upside, the next hurdle aligns at 1.1109
· Chinese Premier Li Keqiang said it is “very difficult” for China’s economy to grow at a rate of 6% or more because of the high base from which it was starting and the complicated international backdrop.
Analysts say China’s economic growth has likely cooled further this quarter from a near 30-year low of 6.2% in April-June. Morgan Stanley says it is now tracking the lower end of the government’s full-year target range of around 6-6.5%.
· British Prime Minister Boris Johnson said on Sunday the next few days would be key to his chances of securing a Brexit deal, and that an agreement with the European Union was still his aim and still possible.
The British prime minister travels to Luxembourg on Monday to meet outgoing European Commission President Jean-Claude Juncker, and has set his sights on winning a revised deal at an EU leaders’ summit on Oct. 17-18.
· The slowdown in China’s economy deepened in August, with industrial production growing at its weakest pace in 17-1/2 years amid rising U.S. trade pressure and softening domestic demand.
Industrial output growth unexpectedly weakened to 4.4% in August from the same period a year earlier, the slowest pace since February 2002 and receding from 4.8% in July. Analysts polled by Reuters had forecast a pick-up to 5.2%.
Despite a slew of growth-boosting measures since last year, the world’s second-largest economy has yet to stabilize, and analysts say Beijing needs to roll out more stimulus to ward off a sharper slowdown.
· North Korean leader Kim Jong Un invited U.S. President Donald Trump to visit Pyongyang in a letter sent in August, a South Korean newspaper reported on Monday, citing diplomatic sources.
In the second letter, which was passed to Trump in the third week of August, Kim spoke of his willingness to meet Trump for another summit, one source reportedly told the Joongang Ilbo newspaper.
The White House, the U.S. State Department and the North Korean mission to the United Nations all did not immediately respond to requests for comment.
· Britain’s departure from the European Union will be delayed again because Prime Minister Boris Johnson’s attempt to do a last minute deal with Brussels will be rejected by parliament, Brexit campaigner Nigel Farage said.
“At the Oct. 17-18 EU summit there will be some give from the European Union and Boris will bring it back to parliament before Oct. 31 and, I suspect, fail to get it through,” Brexit Party leader Farage told Reuters in an interview.
· The attacks on critical oil production facilities in Saudi Arabia over the weekend will effectively wipe out the world’s spare oil capacity, an expert from S&P Global Platts said on Monday.
“This incident effectively eliminates the world’s spare capacity,” Cottle told CNBC’s “Squawk Box” on Monday, though she added the longer-term outlook is bullish due to the immediate need to draw down on crude stockpiles.
But if the outage in Saudi Arabia — one of the world’s largest oil exporters — continues for a prolonged period of time, oil prices could easily rise over $80 a barrel, said S&P Global Platts’ Cottle.
· Washington should prevent Germany from shrinking the European markets that take a quarter of American exports.
To do that, the White House should offer vigorous support to ECB’s easy monetary policy and pressure Germany to immediately stimulate its recessionary economy under threat of raising the U.S. import tariff on German cars.
Washington’s support to ECB would make the Fed more willing to ease to avoid upward pressures on the dollar. At the same time, forcing Germany to stimulate could add some appeal to European asset markets and pull the euro up.
· Oil prices jumped around 9% after a coordinated drone attack hit the heart of Saudi Arabia’s oil industry on Saturday, forcing the kingdom to cut its oil output in half.
As of 0759 GMT Monday, International benchmark Brent crude futures soared $5.45, or 9.05% to $65.67 per barrel. U.S. West Texas Intermediate crude futures jumped $4.38, or 7.99%, to $59.23 per barrel.
· WTI technical analysis: Solidly bid near 11-month falling trendline
WTI oil prices are currently trading at $59.70 per barrel, representing 8.5% gains on a 24-hour basis. Prices hit a high of $60.63 in early Asia, a level last seen on July 15.
The "Black Gold" gapped higher due to Saturday's attack on Saudi Aramco, one of the largest oil-producing drone attack on the Saudi Aramco's oil facility – one of the world's most important oil processing plant.
As far as technicals are concerned, the probability of further price rise would increase if prices find acceptance above $59.89 – the resistance of the trendline connecting Oct. 3 and April 23 highs.
Prices, however, may drop to the former resistance-turned-support of $58.73 (Sept. 10 high) if Saudi officials downplay fears of a prolonged outage.
Reference: Reuters, CNBC, FX Street
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