FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, suggests that global investors still remain firmly in risk-averse mode in the near-term as the market focuses switches back to the ongoing slide in the price of crude oil towards USD30/barrel.
Key Quotes
“The price of copper has also fallen to new cyclical lows reinforcing investor concerns over the outlook for global growth. The negative developments are resulting in accelerating sell offs for commodity and emerging market currencies.
It prompted Saudi Arabia to reiterate yesterday that it remains committed to maintaining the riyal’s peg against the US dollar vowing to “uphold its mandate…backed up by the full range of monetary policy instruments including foreign exchange reserves”. The governor of the Saudi Arabian Monetary Agency attributed recent volatility in the forward market to “mispricing linked to market operators’ misperception about Saudi Arabia’s overall economic backdrop”. Nevertheless the ongoing decline in the price of crude oil is likely to further encourage a build-up of speculative short riyal positions.
If further weakness in the price of crude oil is sustained it will dampen the outlook for inflation in the year ahead delaying the expected rebound in headline rates. Comments today from BoE Governor Carney will be closely scrutinized ahead of this week’s MPC meeting. Lower oil prices and the recent loss of growth momentum in the UK are allowing the BoE to maintain looser monetary policy for longer which is helping to ease pound strength as well in the near-term providing more support for the UK economy on top of the boost from lower oil prices as well.”
(Market News Provided by FXstreet)