The Kiwi Dollar opens lower again as markets focused on oil prices which have jumped by over 15% on the back of the attack on Saudi Arabian oil facilities over the weekend. Market reaction has been fairly predictable with equity prices down, safe haven currencies up, and the U.S Dollar well supported. The NZD has underperformed dropping by around 0.4% from yesterday’s opening level.
U.S – Iran Tensions Escalate
Oil prices were up by as much as 20% yesterday before falling back to ‘only’ a 15% gain. Tensions between the U.S and Iran have escalated with Secretary of State, Mike Pompeo, accusing Iran of being responsible for the attacks on Saudi oil plants. Iran denies responsibility for the attacks and dismissed the US allegations as unacceptable and baseless. President Trump said that the US was “locked and loaded” for a potential response to the attack.
Chinese Data Disappoints
Elsewhere, there was disappointing data out of China yesterday with industrial production and retail sales growth both slowing. Year on Year Industrial Production for August came in at 4.4% growth vs expectations of 5.2%, while retail sales grew by 7.5% vs an expected 7.9%.
The Day Ahead
No major data announcements in the calendar today. The release of minutes from the last Reserve Bank of Australia meeting is not expected to contain any huge surprises. Markets are largely waiting on Thursday when we have the highly anticipated US Fed rate decision, followed by the press conference from Chairman Jerome Powell. Until then, markets are likely to focus on the oil situation and the U.S response to the attack.
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