Tonight in the Asian Session we got the RBA minutes which made it pretty clear that they won’t cut rates for awhile. As a result of that and the China Banks adding liquidity to prop up their 3 year low stock market..we are getting a risk on rally with the eur/usd hitting over 1.2400 in the Europe Session. Commodities and Banks are the stock plays.
But what is the Bigger Picture…Well, of course it is the Rally in Oil, especially Brent which is sitting off of last weeks highs of 115ish at 114 in the Europe Session. And the Big question, what will trigger a reversal in this crazy rally that it has been on? I, of course, thought that it would sell off last Thursday/Friday with talk of Iran Sanctions G5+1 meeting being set in the end of August and the Option X of Brent. This was a especially a good set up with White Houses talking (along with UK and France) about dusting off plans regarding the Strategic Reserves. BUT, alas, we had major talk of possible attacks on Iran by Israel and gossip that the Negotiations were at a difficult stage which supported Oil and prevented the sell off. Well, we are in a New Week. Cathrine Ashton (pic above) is talking by phone with Jalili (pic above) about a date for the meeting for the Global Leaders. The White House appears to be putting pressure on Israel to dampen down War talk. API/EIA is expected to show a build again if we believe Reuter Analyst. My take is that the market is waiting for that Date of a New Meeting of Iran and Global Leaders or Israel to blow something up..my bet of course is with talks. What really amazes me is how little demand there is for Oil out there. Tonight China is showing they used less Oil, even less Iranian Oil which they are paying way below market value for.
For the rest of the Week, IMHO, the most interesting pieces of data is the Flash PMI’s out of China and Europe. China is being hit with bad weather and Europe was going on Vacation so they should be on the ugly side. Most of the Press is talking about the Greek/German/France meetings but Merkel’s people are coming out tonight downplaying any chance of having anything big coming from all of this…so yawn. The other biggie is the FOMC minutes, mainly more detail about what everyone was thinking, or not thinking. BTW, it is amazing how enthnocentric our Fed is. If you read, like RBA’ s (Australia’s Central Bank) you get have the minutes focused on Global Markets…but ours are normal one or two paragraphs on page Nine or so. Anyway, we should see that the Fed is not as QE happy as the market thinks it will be imho. UK GDP data is something to watch.
But, the true story is Oil..so we must sit and wait. (some argue that North Seas Production is a big factor, but that is one field out there and it was only important last week before options because the Buzzard Field was controlling the Brent Price because it was historically the lowest…but we are in Oct Options now and Buzzard should be open mid October and with demand being so low it really is of little importance. So for tomorrow, we should sit and chop after this “risk on” rally peters out until we get news out of Cathrine Ashton that no new meetings are going to be set with Iran or we get news of a End of August Meeting date for Iran and the Global Leaders…until then we sit and wait.Comments »