Morning Commentary: An Avalanche of Negative Headlines

Foreign Exchange - Morning Commentary
An Avalanche of Negative Headlines
Share this story:
Alan Rose
Alan Rose
Foreign Exchange Senior Trader
We begin this week with an avalanche of negative headlines centered on heightened new geopolitical risks in the Middle East. The weekend bombing of Saudi oil facilities is the major story with oil prices jumping sharply by as much as 13% as near 5% of the world oil output has been removed from the markets. Oil prices are correcting slightly lower as the Saudis believe they can restore one-third of the lost oil supplies within a few days. President Trump has authorized the release of oil from the U.S.’s Strategic Oil Reserve if need be.

But this attack on the Saudi oil facilities is a potential game changer for Middle East politics and brings heightened new tensions to this geopolitical mine field. There is nothing to suggest that this is a one-off event and the attacks highlight the vulnerability of the world’s most important oil exporter. Geopolitical tensions will remain heightened as the assessment continues as to who is to blame for the attack. Adding to the woes of the market was disappointing economic data out of China (see below) and the announcement of a GM strike impacting 46,000 workers and thousands of suppliers.

Energy prices are sharply higher across the board while global equities and G7 interest rates are only modestly weaker. Safe haven assets are on the rise (DXY, JPY, and Gold) and countries that are largely energy independent (Canada, Norway, and Mexico) are faring better against this torrent of negative news. Adding more wood to the fire for this week will be the key FOMC meeting on Wednesday. As a reminder to those that did not live through the 1970’s higher oil prices carry a double-edged sword of both potentially weaker growth and higher inflation.
  • Chinese economic data for August came in weaker than expected and added to the negativity surrounding the Asian opening. Industrial production grew only by 4.4% which is the lowest level in a single month since 2002. In addition, retail sales came in weaker than expected. The Chinese yuan is weaker on the session.
  • Brexit is currently on the back burner as Parliament has been suspended and is on recess. PM Boris Johnson travels to Luxembourg to meet with European Commission President Juncker and discuss a “rough shape” of a Brexit deal. U.K. equities, interest rates and the British pound are all lower today partially related to the global news headlines and due some of the euphoria from last week wearing off.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2019 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?