- WTI's initial Rexit rally became a scramble to get out
- Gold receives another Trump boost
on trade war fears
- Steep drop for CAD on possible Canadian steel tariffs
- Important CPI release today after recent EURSEK rise above 10.00
- USD: CPI in-line at 1.8%/2.2%; more political volatility on Tillerson firing
- HG Copper rallied to the middle of its current $3 to $3.30 range
By Clare MacCarthy
Crude oil spiked yesterday on the surprise sacking of the US secretary of state, but the lift was only temporary as the technical outlook weakened and the rally turned into a scramble to get out, says Ole Hansen, head of commodity strategy, in Saxo's daily morning markets call. "Prices jumped because Mike Pompeo, who is replacing Rex Tillerson as secretary of state, is a major hawk on Iran, just like Trump," he says. "However, the risk of renewed geopolitical risks and supply disruptions are likely to keep the downside risk capped, with $58 being key on WTI and $60.5 on Brent."
The rise and fall of crude after "Rexit":
Source: Saxo Bank
Gold, too, received a boost from "Rexit" as well as another bout of US protectionism concerns arising from reports that President Trump is seeking tariffs on up to $60bn of Chinese imports. Gold is likely to remain range-bound between $1300 and $1340/oz ahead of the almost certain rate hike on March 21. Still, the myriad geopolitical tensions now at play means that Hansen maintains a bullish outlook for the yellow metal "as long as it stays above $1285/oz".
The threatened Trump trade war is causing waves in forex markets too, especially for the Canadian dollar, after the country's prime minister, Justin Trudeau, admitted that he may have to introduce his own sanctions to prevent dumping into the US via Canada, says John J Hardy, Saxo's head of forex strategy. "We saw a considerable CAD move to the downside on this," Hardy says.
Elsewhere, the US dollar is a bit weaker after yesterday's CPI release which "doesn't really shift interest rate expectations going into next week".
On the data front, today's US February retail sales warrant attention because, Hardy explains, they're "the last important data print before next week's FOMC".
Canada may be forced to introduce steel tariffs to prevent dumping into the US.
Photo: Brian Kenney / Shutterstock.com