Speculation on oil production freezes and positive US data allowed risk sentiment to improve. Oil rose 7 percent overnight after Iran voiced support for a freeze production deal led by Saudi Arabia and Russia. Under the negotiation, production would be frozen at their January levels. Markets responded positively to the Iranian minister’s support for the OPEC and non-OPEC decision, however sustained price gains seem unlikely until Iranian commitment is confirmed.
Equities pushed higher as risk appetite improved. European markets closed in the green with the DAX and FTSE100 up 2.7% and 2.9% respectively. Wall Street traded higher yesterday, led by gains in energy and materials as oil prices held on to their gains.
Ahead of FOMC tonight USD is trading higher against all counterparts. EURUSD hit 9 day lows after the US data while GBPUSD dropped even further to 16 days lows of 1.4232 from 1.4660 levels last week. US producer price index rose 0.1% in January, relative to expectations of a 0.2% decline, while excluding volatile food and energy categories, core prices climbed 0.4% (0.1% exp).
For now, the agreement to stabilize production, along with the acceptance of accommodative monetary policy in Europe, relative stability in the Chinese yuan has helped calm frayed nerves globally.
As a friendly reminder, please remember these strong correlations that have formed lately:
OIL rises – Stocks rise too, as well as Canadian Dollar.
Stock rise – USDJPY rises, EURUSD drops, Gold drops.
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