The European Council meeting is today's key event. A steady, but persistent, widening in BTP-Bund spreads suggests the market expectation remain tepid.
With the EU set to resume their infighting on a conference call today, the Italy downgrade (or no downgrade) this Friday amid an increased focus on peripheral debt widening, the Euro has been struggling for traction the past 24 hours. But establishing an economic recovery fund even without joint liability could prove to be positive for Euro-denominated assets.
The front-end of the WTI and Brent futures curves have rallied, relieving the extreme contango conditions earlier this week and taking the pressure off oil-sensitive currencies.
There’s a focus on potential US government support for the energy sector that could involve a cash swap to incentivize producers to stop drilling until oil prices recover.
One of the reasons I like "Oil" right now, including the basket of WTI, CAD, AUD and oil majors, is that Congress has yet to disappoint and when considering the immense importance of the oil industry in the US market, credit risk notwithstanding, it's illogical to think they won't come through after "US Treasury Secretary Mnuchin’s "spend what it takes" comments.
Congress's support for the energy sector has to be at the top of a to-do list as are prorations to incentivize producers to stop drilling until oil prices recover. A positive outcome is in the best interests of everyone, not just in the US but virtually every price taker of oil around the globe. That's a ton of US goodwill to spread around the world at a time when leadership is crucial.
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Equities hit with the inflation stick; Saudi assurance provides oil with shelter from the storm; USDJPY hedge plays building; Gold appears prone