Brexit Woes, Oil Surged On Fuel Draws

A Brexit deal was finally drafted, which agreed upon by UK and EU yesterday, prompting the cable higher. However, gains were limited after DUP stated that they would not back for Johnson’s deal, which suggests the Northern Ireland remain in a customs union after Brexit. Market participants are worried that although a new agreement was done, it might not receive majority approval from the UK Parliament, the same case which happened during ex-PM Theresa May. EU council meeting today will be crucial, as any last-minute amendments towards the deal can be made for it to be passed through UK’s Parliament.

Oil prices surged more than 2% on Thursday, being supported by a significant draw in US fuel stockpiles. The plunge in fuel stockpiles is followed by the maintenance of US refineries, which resulted in a deficit of oil products. However, gains were limited by a higher than expected buildup in US crude inventories. According to the EIA, US crude inventories rose to 9.281M barrel. Last week, exceeding economists’ forecast of 2.878M barrels only. Oil was able to receive upward momentum amid already weak sentiment in the market. The draw in fuel was able to win over the market, causing a higher demand for the black commodity.

The gold price was overall higher on Thursday, with Brexit uncertainties still linger in the market, investors are still holding on to their safe-haven assets. Furthermore, the lack of clear direction on how future trade progress will go between US-China further increased market uncertainties. Previously after the first round of negotiations, President Trump stated that he was ready to sign Phase 1 of the deal with China counterparts. However, China said that more talks were needed before they are prepared to sign the Phase 1 deal. The upcoming market driver will be Fed’s policy meeting at the end of the month, where a 25 basis-point is now highly expected.           
 

The dollar index was traded lower on Thursday following the release of weak economic data. US Fed Philadelphia Manufacturing Index fell to 5.6 from the previous 12.0, indicating a further slump in the manufacturing sector. Further supporting the drop was US Industrial Production, which fell to -0.4%, showing a lower value of output. With manufacturing sectors, even in the US, showing contracting signals, Fed will most likely include the issue during their monetary policy meeting later this month, which could support the reason for further rate cut to boost the economy.