Oil Jumps Higher

Daily Analysis - 22/05/2018

U.S. Imposes New Sanctions on Venezuela

oil-jumps


As the U.S. eases trade war tensions with China, President Trump’s administration announced new sanctions on Venezuela a day after the elections where President Nicolas Maduro was re-elected. The U.S. said it will take "swift economic and diplomatic actions" to help restore democracy in Venezuela. Since Venezuela is a large oil producer, the news had an impact on crude prices.

 

Commodity space and Stocks benefit from U.S. China Trade Deal


Crude oil and the broad commodity space also benefited from easing trade tensions between the U.S. and China. The two countries have agreed to hold off on any further tariffs. Meanwhile, trade negotiations are ongoing. U.S. Commerce Secretary will continue talks in China this week. Crude oil rose above $72 a barrel for the first time since November 2014. Copper prices rallied as China is a big consumer of the commodity. The Australian dollar also marched higher to its strongest level in four weeks against the greenback above $0.75. The Dow gained 1 percent, while Boeing, which is the highest priced stock in the Dow, was the biggest mover yesterday.

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Euro pressured by Italian Politics


The ECB is concerned about the amount of Italian debt it holds. At the end of April, the ECB held 341 billion euros worth of Italian sovereign debt. Italy’s new populist government risks increasing the nation’s public debt. Talk of issuing new government debt via mini-BOTs led Italian stock markets tumbling on Monday and also negatively impacted the euro. EURUSD fell to its lowest level this year so far, touching 1.1716 on Monday.

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Sterling in Focus as Markets Await a String of U.K. Data


Sentiment on the British pound remains bearish and GBPUSD is trading at its lowest since December 2017 in the $1.34 handle. Bank of England Governor Mark Carney will be closely watched today during the Inflation Report hearings where he and several MPC members testify on inflation and the economic outlook before the U.K. Parliament's Treasury Committee.

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