European markets are trading higher ahead of the most important economic number, the German ZEW economic sentiment. The biggest economy of the eurozone is struggling and the ECB has done what it could do (for now). From the fiscal side, there are still no solid signs of any support coming from the government. Nonetheless, traders are going to see this number very closely mainly to see if the ECB’s recent announcement has done any favour to overall sentiment.
Separating Noise From Price Action
It is all about separating noise from the actual news and looking at the oil price action more closely always helps us to form a more informed decision about trading. Yesterday’s ballistic moves for the oil industry do not carry the same amount of weight today. Remember, OPEC always talked about curtailing the oil supply, compliance issue, and the recent incident has addressed this from both sides- at least in the short term.
The reason that we are not seeing the same momentum in the oil price today is because of two reasons: firstly, the feeble economic growth because of the ongoing trade between the US and China. Finally, rising oil prices are likely to trigger recession fears once again, because higher oil prices are negatively correlated with economic growth.
No one wants to see the oil spiraling back to 100 dollars per barrel level especially not when consumer spending is already under pressure.
Saudi Arabia Needs To Pay Attention To A Bigger Picture
From Saudi Arabi’s perspective, I think the country needs to play its cards sensibly. The reason that I am saying this is because any further increase in the geopolitical tension is not only going to impact the upcoming Armco IPO, which is already delayed, but also Muhammad Bin Salman, the Crown Prince’s plan- vision 2030.
Investors won’t be remotely interested to invest in the Middle East if Saudi Arabia picks up a war with Iran, and so far, all the signs are pointing towards an avenue where we could see a further escalation in geopolitical tension. We think it is in Saudi Arabia’s best interest to resolve the ongoing issue with a cool head and not lose its main focus; a successful IPO for Armco and a success story on Vision 2030.
British Pound & Boris’s Tactics
Back in the UK, the British Prime Minister is confident that he can win his case of suspending Parliament in the English court. The three-day battle starts today in the Supreme Court in London. He is still no way close enough to achieve anything on Brexit front, but still consistent in delivering the idea that he will be able to forge a deal, and Parliament will have enough time to debate and scrutinize it. The European Commission President has said that the UK still hasn’t brought any solution to replace the backstop and there is no concrete solution insight.
In the meantime, the British Pound is still above the critical level of 1.24 against the dollar. The GBP/USD pair failed to break above the 100-day moving average, which is trading at 1.2508. As long as the price stays above the 1.2279, this is where the 50-day moving average is, the chances are that the price could cross above the 1.25 mark.
