May dismissal may breath new life into sterling

FX:XAUUSD   Gold Spot / U.S. Dollar
Oil market

Oil traders have not yet decided on further price direction, but rather are looking for an excuse for pullback than for backing last week rally. According to Baker Hughes , the number of drilling rigs in the US increased last week while production reached a record 9.62M bpd. The most alarming part in fundamental picture of the US output was the pace of recovery after hurricanes blow - producers covered a drawdown of 1M bpd in just two weeks. This points to serious plans of US producers to fight for a share in the foreign market. One of the indicators of the increasing US export may be narrowing spread between Brent and WTI, which may disguise the dynamics of inventories in industrial countries, the main OPEC’s target.

OPEC pledges it will continue to fight against the glut, while preserving production caps among cartel members. Secretary General Mohamed Barkindo said at the Abu Dhabi conference that thanks to the economic upturn, hydrocarbon consumption forecasts are likely to change more than once, while the cartel will remain committed to supply reduction policies. Most important update will be probably made at a meeting on November 25 in Vienna. As a factor of uncertainty, this meeting will most likely cause pressure on prices, so the price forecast, based on the available information, remains bearish for this week.

The market also probably priced in the information on increasing production of Russian Rosneft , which in the third quarter amounted to 70.5 million tons, up 0.7% compared to the previous quarter.

Tax Reform

Investors in European markets show defensive behavior, the German DAX and the British FTSE are traded in negative territory. The market extend profit-taking move, since uncertainty before the release of final version of the tax reform makes it difficult to determine the future prospects for global economic growth. The US Senate and the House of Representatives are arguing about the feasibility of repealing the property tax, the main point of the reform at which there are disagreements. Markets closely monitor any news about the negotiation process, which produced a kind of a lull before the storm. Safe heaven assets are slowly creeping up and for gold this week is likely to become very productive.

Pound Sterling

The sharpest movement in the foreign exchange market among the major currencies occurred on GBPUSD . As expected, the pair rushed to the level of 1.30 on the ordeal of Prime Minister Theresa May to hold power in their hands, while the deadline of Brexit talks are approaching. According to the newspaper Sunday times, more than forty members of parliament spoke in favor of dismissing May from the post of prime minister. Conservatives need to collect eight more votes to start the process of dismissal from the post of party leader and choose a new leader.

Arthur Idiatulin
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This analysis is provided as general market commentary and does not constitute investment advice.
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