Traders spent the past 5 days looking towards Fed Powell’s speech at Jackson Hole as the big risk event this week, only for China to swipe the attention at the last minute. China announced tariffs of 5% - 10% to be placed on an additional $75 billion of US imports including soybeans, cars and oil.
Oil tumbled following China’s announcement as the escalation of the trade dispute is knocking the global growth outlook and future oil demand expectations.
Federal Chair Jay Powell indicated that policy makers are more concerned over trade policies than inflation. Powell’s pledge to act as necessary offered some reassurance to the markets that support is on its way. The Fed chair certainly didn’t say anything to indicate a pushing back on a 25 basis point rate cut expected in the coming months. The prospect of support to the US economy, boosted the price of oil.
WTI levels to watch:
Oil was trading 2.5% lower following the announcement of the Chinese tariffs, hitting of a low of $53.42. Following Jay Powell’s speech oil pared its losses moving $1 higher. Should oil continue to rise resistance could be tested in the region of $55.60 prior to $56 and $57.50. On the downside support can be seen at $53.50 prior to $53.00.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.