Yellen surprises and US Military action push safe heavens higher
US joint military exercises in South Korea which risked to run across ultimately response from North Korean leader, has been set off. It may be a new reserve for exacerbation of the geopolitical situation on Korean peninsula. The market so far does not lend itself to provocations, the VIX index is in negative territory, gold is showing sluggish attempts to return to the growth phase, but the confrontation for the $ 1,300 level is expected to have a more complex outcome, as the fundamental picture promises to be replenished both by the Fed statements and the potential response of North Korea. There is a high probability that the risk aversion will outweigh and trade in defense assets will take place in the green zone.
ECB President Mario Draghi unfortunately refrains from discussing monetary policy on the speech in Jackson Hole on Friday, but from Janet Yellen markets expect seminal comments that will allow to adjust expectations on the timeframe of money supply cuts. In the light of slowing inflation in developed countries, the markets will be able to take a stock of assumptions about why the Phillips curve does not work, whether the relationship between employment and price increases is still alive (and in what degree) and what happens with labor productivity. Gloom or optimism will either pave the way to guessing the degree of participation of central banks in supporting the economy, and hence the dynamics of rates, stimulus, etc.
On the positive side for oil traders there was news about production outage at the Libyan field of Sharar. The decline in production was 280 thousand barrels, the timing of the return to operation is still unknown. Last week, the reduction in US inventories exceeded expectations, but given the increased demand for gasoline due to the travel season, it has mild effect on prices.US rig count shrunk by 5 according to Baker Hughes, but stabilization of drilling activity near 760 rigs together with oil prices swaying near $50 per barrel clearly shows that further growth in oil prices rests on a fundamental factor in the absence of radical OPEC decisions. Spreads in the futures market declined, which also suppresses the activity of American producers that hedge profits maintaining high supplies.
Arthur Idiatulin, Tickmill Market Watcher
ECB President Mario Draghi unfortunately refrains from discussing monetary policy on the speech in Jackson Hole on Friday, but from Janet Yellen markets expect seminal comments that will allow to adjust expectations on the timeframe of money supply cuts. In the light of slowing inflation in developed countries, the markets will be able to take a stock of assumptions about why the Phillips curve does not work, whether the relationship between employment and price increases is still alive (and in what degree) and what happens with labor productivity. Gloom or optimism will either pave the way to guessing the degree of participation of central banks in supporting the economy, and hence the dynamics of rates, stimulus, etc.
On the positive side for oil traders there was news about production outage at the Libyan field of Sharar. The decline in production was 280 thousand barrels, the timing of the return to operation is still unknown. Last week, the reduction in US inventories exceeded expectations, but given the increased demand for gasoline due to the travel season, it has mild effect on prices.US rig count shrunk by 5 according to Baker Hughes, but stabilization of drilling activity near 760 rigs together with oil prices swaying near $50 per barrel clearly shows that further growth in oil prices rests on a fundamental factor in the absence of radical OPEC decisions. Spreads in the futures market declined, which also suppresses the activity of American producers that hedge profits maintaining high supplies.
Arthur Idiatulin, Tickmill Market Watcher
This analysis is provided as general market commentary and does not constitute investment advice. Past performance is not indicative of future results
