Most major currencies in the past 48 hours have weakened against a Dollar which is up slightly for the second consecutive session, with markets still digesting the implications of the surge in the price of crude oil.
Drone attacks on two key Saudi oil installations over the weekend have halved the Kingdom’s oil output and Brent crude jumped by $12/barrel yesterday – the largest ever one-day percentage rise – before settling around $68/barrel. About 5% of the world’s oil production is now off-line and reports suggest that the Saudi installations may not be up running for weeks or even months.
Investors have seemingly sought refuge in the Dollar, despite the release yesterday of another weak set of NY Fed Empire State manufacturing indices. The leading indicator of economic activity in the US manufacturing sector slumped to just +2.0 in September – the second lowest print since October 2016 – cutting the Q3 average to just +3.7 (the weakest quarter since Q4 2016). Markets will now be turning their attention to the Fed’s policy meeting on Thursday and the subsequent release of Philly Fed manufacturing
index data.
The GBP/USD cross is down about 1-big figure from its recent highs to 1.24 ahead of the ruling by the Supreme Court as to whether British Prime Minister Johnson’s decision to suspend parliament till 14th October was lawful.
The Euro has bucked the trend, with the EUR/USD cross up slightly today to just above 1.10. The release of better-than-expected German ZEW data yesterday may have helped at the margin. The ZEW economic sentiment index for the Eurozone’s largest economy remained in negative territory in September – at -22.5 – but this was considerably better than analysts’ forecast of -38.0. Nevertheless, this forward-looking indicator of economic activity still dropped from -6.7 in Q2 to -30.4 in Q3, its lowest level
since Q4 2011, increasing the odds that the Germany economy was in recession in Q3 (after GDP contracted 0.1% qoq in Q2).
