Market update: Oil prices rise as Iran tensions keep escalating, GBP plunges on Brexit Party panic

17 May

by Mihály Tatár


Good Morning!


  • The ’Beijing-ECB-Fed stimulus will surely come and save growth’ themed correction continued on Thursday (SPX +0.89%, Nasdaq+0.97%, DAX +1.74%, Nikkei +1.09%, but Shanghai -1.55% as the Yuan dropped to six-months low), squeezing out badly timed shorts. The EURUSD is trading at 1.1170 again (remember the excited cheerleading earlier this year, that the bouncing-to-strength German economy and the settled Brexit will push it above 1.20? Now the very same analysts are throwing in the towel and predict sub-1.10 levels, with the market now gradually pricing in an ECB rate cut by 2020. One has to wonder, from -0.40% base rate, and at a German 10Y yield of -10 basis points, what would a cut going to achieve? And how long the dropping Euro will be tolerated by Washington?) Hit by the Trump backlisting of Huawei, its chip suppliers plunged (Qorvo, Xilinx, Skyworks -5%, Inphi -15%, while rivals Ericcson and Nokia jumped 2% and 4% respectively), but the main victim of the day was the Great British Peso (GBPUSD 1.2780, that’s -3% in about a week, leaving behind the key psychological 1.30 zone), as a tearful Theresa May was forced to agree to stand down after the final Brexit vote. (To save the Conservative Party from total collapse – Nigel Farage’s Brexit Party is firmly at the first place in the polls with 30% – Boris Johnson reactivated himself and tries to finally become Prime Minister. Both are priced in as no-deal Brexiters by the market.)


  • While Angela Merkel found it necessary to call for unity in Europe to ’stand up to China, Russia and the US’ again (given her poll ratings are in the low 20s, which is not unrelated to her 2015 decision to ignore anyone else and turn the EU into a migration zone, it’s no wonder nobody listens – to paraphrase Game of Thrones, if you need to call for unity every other week, there is no unity), oil prices rose from the 200-day-moving averages (WTI 62.90, Brent 72.60 USD) with Saudi Arabia accusing Iran of ordering this week’s attacks and urging the US to launch surgical air strikes against the country. For their part, Trump and his top officials tried to play down the possibility of a war, ’I hope not’, ’I’m sure that Iran wants to talk soon’ – said Trump, but this was only taken seriously by mainstream journalists (’Trump wary of plunging into Iran war ahead of 2020 Re-election’). Top Iranian general Qassem Suleimani instead told his armies ’to prepare for a proxy war.’ My personal opinion remains, as discussed here last year,  that Washington needs to deal with Iran before executing Trump’s pullback promise from the region – and for that, maximum economic, diplomatic and military pressure will be applied on Teheran so that it eventually makes a big mistake that can be punished or folds and asks for a deal.


Have a nice day,



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