In Friday’s note, we concluded that the demand side of the oil equation is rather straightforward. The rudimentary view foresees further possible demand destruction due to the seemingly perennial trade wars across the globe, but investors will only adjust their default pessimistic view if deteriorating data warrants it. The supply side has considerably more tentacles.
It is Friday. You are fully aware that the Bank of Japan held rates steady earlier in the week as trade wars loom large. The Fed also stayed put acknowledging the absence of a conducive economic environment. The Swiss National Bank introduced a cut yesterday, but the Swedish Riksbank and the Bank of England decided to wait.
Although the US Federal Reserve kept its key interest rates unchanged, markets allowed themselves to relax into risk and a better mood swept across many of the investment suites. Despite the FED now expecting unemployment to rise from 4.1% to 4.4% and GDP to reduce from 2.1% to 1.7%, investors seemed to focus on Jerome Powell’s post-match press conference where he warned on inflation likely increasing due to tariffs, but such acceleration would at present be “transitory.”
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