Oil Prices Tumble After Obama Is Speech
The price of oil fell after US president, Barack Obama, announced an open-ended aerial campaign to defeat the Islamic State (IS) last night. Meanwhile, worse-than-expected jobless claims data highlighted on-going fragility in the economy.
Thursday, September 11, 2014 - 00:00
Futures trading indicated that US equities would open in the red and that proved to be the case. After fifteen minutes of trading, the Dow Jones Industrial Average was down 0.35%, or 58.98 points, to 17,009.73. The S&P 500 also fell, by 5.72 points, to 1989.97.
President Obama last night used a national TV broadcast to outline his forceful strategy to defeat the IS. Obama promised to sanction aerial attacks on IS targets in both Iraq and Syria. ‘We will conduct a systematic campaign of airstrikes against these terrorists’ said Obama. He added that the attacks would occur despite US intelligence not having ‘detected specific plotting against our homeland’.
Commodities traders tentatively endorsed the move, and the price of oil fell. By 08:30 EST, crude WTI for October delivery was down by more than 1% to $90.62. Separately, the Organization for Petroleum Exporting Countries (OPEC) said demand for oil in 2014 would rise by 1.05 million which was 50,000 barrels less than previously anticipated.
Labor market data, released this morning, pointed to signs of struggle for jobseekers. The number of Americans who filed for unemployment insurance rose, by 11k to 315k, confounding expectations for a 4k drop. The figure marked their highest level in two months. The initial jobless claims four-week moving average, which strips out noisy movement in the measure, was broadly flat, coming in at 304k from a 303.5k figure the week prior. Nonetheless, the data showed that US labor market conditions have yet to recover fully and may not be ready for a normalization of monetary policy. Next week’s numbers, which will cover the same week as September’s nonfarm payrolls sample, may now take on added significance.
Currency markets appeared to lose some faith in the US dollar as the greenback declined against both the British pound and the euro. The pound benefitted from a new poll, released last night, that indicated Scottish voters would vote against independence. The survey gave the No camp a six-point lead, contradicting a YouGov poll from the weekend that gave the Yes camp a two-point lead. GBP/USD rose 0.26% to 1.6247, reversing losses suffered during this week’s trading. Voting takes place one week from today. Until there is further clarity on the outcome of the referendum, British pound pairs are likely to experience heightened volatility. Separately, EUR/USD was up by a similar margin, rising 0.25% to 1.2949, as some euro shorts may be taking profits after sustained losses since the European Central Bank (ECB) announced further stimulus measures last week.
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