Crude prices offered support from increasing geopolitical risk

Wednesday, November 25, 2015

George Osborne is set to deliver his Autumn Statement today and is largely expected to present fresh plans on how public sector debt will be curtailed, with an aim to balance the books by 2020. The pound sterling continues to trade cautiously ahead of today’s proceedings, losing ground against the USD for the past three sessions and giving back almost all of mid-November’s modest gains as it trades just below 1.5100 against the greenback. With the UK economy growing in line with forecasts market participants aren’t expecting a drastic shift in the Chancellor’s outlook, however, with persistently low inflation forecasts for growth may be crimped slightly. One thing's for sure, after his proposal to cut tax credits faced defeat in the House of Lords it will be interesting to see how the Chancellor navigates this sensitive issue today.

Front month Brent futures managed to gain for a third straight session, a feat last achieved in early October, as mounting geopolitical tensions in the Middle East prompted some buying. The global benchmark rallied over 2% yesterday after Turkey downed a Russian jet near the Syrian border and with the tensions showing no signs of abating any time soon we could see further gains in the coming sessions. For now though, Brent futures are consolidating recent gains, trading around $45.90/bbl early on this morning after a brief attempt to gain a footing above $49/bbl.

The fresh bout of risk aversion has also offered some support to gold prices which look set to rally for a second day after gaining 0.6% yesterday. Spot prices for the precious metal briefly traded above $1,081/oz yesterday but struggled to hold onto the protracted gains with activity early on this morning once again attempting to gain a footing above this level. Given the heightened risk aversion we could see the yellow metal gain further ground but with a firm USD significant gains will likely be limited as attention may soon switch to next month’s FOMC meeting on expectations of an interest rates rise.

Sterling facing pressure ahead of Autumn Statement

GBP Curncy British Pound Spot 2015 11 25 08 07 43 

Brent futures offered some support from rising Middle East tensions

CO1 Comdty Generic 1St CO Fut 2015 11 25 08 42 24

Events for today

1330

US

Oct

Durable Gds & New Orders

1330

US

Oct

PCE & Personal Income

1400

US

Sep

FHFA House Price Index

1445

US

Nov

Markit Manufacturing PMI

1455

US

Nov

University of Michigan Survey

1500

US

Oct

New Homes Sales

1530

US

w/e

EIA Energy Stocks

Topics: USD, Gold, Brent
More from: Kash Kamal