The dust is beginning to settle after a busy few days of central bank jostling. Markets have now had an extra day to digest the implications of the latest Fed meeting and in the absence of much else going on, attentions are focused on fundamentals. The Dollar reacted positively to Jerome Powell’s statements on Wednesday and the bullish momentum carried over to Thursday’s session. The DXY briefly rose back above 104 yesterday before a minor pullback and is once again on the front foot this morning in Asia.
The Euro, which makes up the bulk of the Dollar Currency Index, failed in its attempt to reclaim $1.10, at least for the time being. Cable was likewise unable to hold onto $1.30 despite the Bank of England’s warnings that rate cuts were unlikely over the next few meetings. Central banks around the world are all reading from the same script, from the Bank of Japan to the ECB, the dominant theme is one of uncertainty caused by the ongoing tariff antics. Until such fears are addressed, financial markets are in wait-and-see mode.
The US Treasury Department issued new sanctions against Iran on Thursday, this time by targeting a specific Chinese oil refinery responsible for processing Iranian crude oil. Such ventures are known as “teapot” refineries and are a way for regimes to bypass international sanctions. Crude oil is carried via shadow fleets, the purpose of which is to conceal the origin of the sanctioned oil, before being processed in a private foreign refinery and sold on. The move is interesting because it marks the first time such sanctions have targeted a specific company. Coupled with worrying developments in the Middle East, crude oil prices finally had grounds to rise this week, to $72 a barrel for Brent and to $68 for West Texas Intermediate.
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