02.09.2019: Oil prices react to US and China’s higher tariffs (Brent, USD/RUB)
The 1st of September was the crucial day for market participants. Analysts expected high volatility while most experts braced for the global economic crash. Today, higher tariffs imposed by the United States on the Chinese goods came into operation.
At the same time, China introduced higher customs duties on the American goods. How did traders react to this turn of events? To find it out, watch our news release on InstaForex TV website. The oil market came under pressure amid the persisting uncertainty about trade relations between the two superpowers that are becoming more tense as the countries are pursuing the protectionist policies.
A possible decline in the global demand may cause oversupply problems. Amid that, the Brent crude benchmark remained in a tight trading range between 58.5 and 61.5 dollars per barrel after it had declined to 58.80. A further fall can prompt traders to close their long deals, thus pushing the price towards 54-55 dollars per barrel. Meanwhile, the upbeat data from China has capped a further slide in oil prices.
The manufacturing PMI increased unexpectedly. It rose to 50.4 points from 49.9 points in August. The reading below 50 level shows a contraction in the sector while the reading above it indicates expansion. The oil rig count data from the United States has also provided support to crude oil. Baker Hughes reported on a fall in the number of active drilling facilities for the ninth month in a row.
The report showed that oil rigs declined by 12 units to 742 units. On an annual basis, this number decreased by 120 units. Bearing in mind positive sentiment of oil traders, we should note that on Friday, the 30th of September, the US dollar index hit a fresh high which had a negative impact on the commodity market. The dollar-quoted oil futures have also come under considerable pressure.
The US dollar strengthened as the appetite for risk is low amid worries about worsening of the global economic state. The EM currencies are under the most adverse conditions. The only currency that has managed to stay afloat is the Thai baht as it turned to be immune to the trade relations issue.
Meanwhile, the ruble has got stuck in a trading range between 66.60 and 66.80 levels against the US dollar. The Russian currency lost about 5% in August. Thus, it has lost its position in the top three best performers on Forex.
Ruble traders will pay close attention to the Bank of Russia monetary policy meeting and a subsequent press conference of the bank’s governor. The meeting will be held on Friday. Meanwhile, we keep close tabs on the market developments.