G7 and Trade war Under Focus | Oil off its Low


Bargain hunters have attacked the oil market and this has pushed the oil price higher. Having said this, the price is still moving close enough to the the previous day’s trading sessions. In order for us to declare that we have formed a bottom, the price needs to show more strength and it needs to break above the $68 mark for the WTI.


OPEC could increase the supply as the US has requested the cartel to loosen up the tap a little. However, the US inventory stockpiles continue to support the oil price to some extent and it shows that there is no glut. The US trade inventory data released yesterday showed that the US inventories have fallen by2%.

 

Global trade war is the only factor providing the support for the gold price. Retaliation was the very act which traders had in their mind, a direct consequence of Trump’s action. Mexico introduced tariffs on US steel, bourbon and pork. If Trump doesn’t soften his stance towards North American Free trade agreement, the situation would only get worse and this could provide the support for the gold price.

 

The other aspect where the gold price would see some impact is the upcoming Fed meeting during which it is expected that the Fed would hike the rate again. Strength in the dollar index could push the gold price back toward the 1280 mark.

 

As for the equity market, we may continue to move higher but caution is the main word amid investors. The focus remain towards the upcoming G7 meeting where trade-war would be the most debated topic. This is a war created by Donald Trump, the president of the United States. Mr Trump is of the mind frame that by putting this kind of pressure on other countries can get him the desired outcome. This may be true to a certain extent because there appears to be some sign that China has agreed to buy US agriculture and energy products worth more than $70 billion under a condition that no extra tariffs would be implemented.

 

Italian bond yield have suffered once gain and the spread between the German and Italian two year bond yield has taken off again coz the new new Prime Minister of Italy has pledged to push the agenda of the populist parties forward.

 

 

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