October 21, 2019

Rising MidEast tensions prevail in markets

LQDFX Forex news Blog Rising MidEast tensions prevail in markets

The attacks raised fears of a new MidEast conflict. Tension in the oil-producing Gulf region has dramatically escalated this year after Trump imposed severe U.S. sanctions on Iran.

Relations between the United States and Iran have deteriorated since Trump pulled out of the Iran nuclear accord last year. The US President reimposed sanctions over Tehran’s nuclear and ballistic programs.

An attack on Saudi Arabian oil facilities at the weekend halved the kingdom’s production. The attack damaged the world’s biggest crude-processing plant and triggered the largest jump in crude prices in decades. Prices retreated after U.S. President Donald Trump approved the use of his country’s emergency oil stockpile to ensure stable supply. But he also said he was ready to respond to the strike, a prospect that maintained geopolitical tensions.

U.S. President Donald Trump said on Monday it looked like Iran was behind attacks but stressed he did not want to go to war. But Iran has rejected U.S. charges it was behind the strikes on Saturday.

The oil price spike after attacks on Saudi Arabian oil facilities over the weekend added to the list of risks facing an economy already slowed by ongoing trade tensions and global weakness. The deep divide evident around the Fed’s policymaking table means further rate cuts could be far from a done deal.

Deep disagreements within the Federal Reserve over the economic outlook and how the U.S. central bank should respond will not stop policymakers from cutting interest rates at a two-day meeting that begins on Tuesday.

Investors adopted a wait-and-see approach ahead of the U.S. Federal Reserve’s two-day monetary policy meeting. The central bank is widely expected to cut interest rates. It would be the central bank’s second such cut after lowering rates in July for the first time since the financial crisis.

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Forex – Rising MidEast tensions prevail in markets

Moves were slight as traders await outcome of the U.S. Federal Reserve policy meeting on Wednesday.

The dollar firmed within sight of a recent two-year high on Tuesday on the back of ongoing geopolitical risks in the MidEast. Against a basket of its rivals, the greenback edged 0.1% higher at 98.744, heading towards a May 2017 high of 99.37.

The Australian dollar led losers against the greenback after its central bank flagged a dovish bias in its latest policy meeting minutes. Aussie also fell 0.5% after the Reserve Bank of Australia flagged an easing bias in meeting minutes.

The dollar rose to its strongest since Aug. 1 against the yen, touching 108.36 yen.

Sterling retreated from six-week highs against the dollar on Tuesday. Prime Minister Boris Johnson stuck to his pledge to take Britain out of the European Union by Oct. 31, vowing not to seek an extension to the deadline. But the currency is also being buffeted by the volatile dollar, which rose as oil prices eased.

Gold prices were steady on Tuesday as the market is relatively stable. Spot gold was mostly unchanged at $1,498.64 per ounce as of 1110 GMT. Elsewhere, silver edged 0.1% lower to $17.83 an ounce.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, Investing, CNN money

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