Traders Digest Fed Comments and Eye Oil Rig Data

On a quite Friday, focus will remain on the oil market and the Fed as traders try to dissect the wide ranging views of policy makers in order to anticipate when the next rate hike will actually happen.

We had more comments from policy makers on Thursday but once again, there was no consistent messages and John Williams – who earlier in the week sent the dollar into a tailspin after suggesting that the inflation target should be higher, which suggested there was little desire to raise rates – claimed there should be a hike sooner rather than later.

The Fed: A Great Divide or A Growing Rift

Meanwhile we also heard from a couple of his colleagues – William Dudley and Robert Kaplan – and again the message wasn’t necessarily consistent with Dudley reiterating that the US economy is strong, as displayed by the labour market data, while Kaplan claimed that while there is some room for manoeuvre on interest rates, it’s limited. With other messages from policy makers being more inconsistent again, it’s no surprise that the markets are changing their mind on the timing of the next hike on almost a daily basis. If the Fed clearly isn’t sure when it’s going to happen, how are investors meant to accurately price it in.

The other focal point for investors at the moment is the oil market, where the price of crude continues to climb on the growing expectation that OPEC could agree to a price freeze or cut when it meets on the sidelines of the International Energy Forum next month. Saudi Arabia, the most important player in the cartel, has played up these reports recently but I do still remain sceptical. It seems there’s always a desire to find a solution ahead of these events and yet, the dream is always more promising than the reality. The markets though clearly believe it is a strong possibility this time.

USD/JPY – Yen Continues Hugging 100 as Japanese Business Activity Hits Estimate

With Brent crude trading back above $50 a barrel and WTI potentially also looking to cross the threshold soon enough, a deal is clearly at least partially priced in. Should no deal be forthcoming then we could quickly see prices heading back towards $40 once again.

Brent Daily

WTI Daily

Source – OANDA fxTrade Platform

Brent and WTI are both trading marginally lower so far today, with traders eyeing the Baker Hughes oil rig count data, released later on in the session. Should we see an eighth consecutive weekly rise in the number of rigs in the US, it may further alleviate some of the upward pressure on oil prices which have only increased over the course of this week.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam