Market movements are dynamic for several reasons. Before the price of USD was fluctuating due to Powell's speech, now it is Pound Sterling's turn to decline. The pound fell after British Prime Minister Boris Johnson increased the chances of trade negotiations failing with the European Union.
This situation makes investors rearrange their strategies in trading in global markets. They must monitor various aspects there. According to the data, the Sterling fell as much as 0.6% against the US dollar. It extends the decline and is the longest since June.
This situation came as Johnson prepared to tell the EU he was willing to let talks fail rather than compromise on what he saw as the core principles of Brexit. On the other side, the price of oil is also declining for this period.
Decisions Taken Without Consensus
Johnson gambled without a deal because EU talks were short-lived. Talks between the two sides will continue this week and it may come with some new decisions. The British currency touched its highest level this year last week amid a weak dollar.
Investors are refocusing on Brexit with both sides accepting that they need to reach an agreement in October. This step is important to open the best and safest way at the end of the year. It is especially so when the Brexit transition period ends.
The failure could add to economic pressure in the UK after the impact of the coronavirus. According to Group-10's head of foreign exchange strategy at Credit Agricole, the pound could drop to $ 1.20 if there is no deal. It must be anticipated.
Oil is Also Experiencing a Decline in Price
Oil prices traded down more than 1% on Monday after hitting the lowest level since July. It is as Saudi Arabia made its deepest monthly price cuts for supplies to Asia and optimism about a demand recovery eased amid the pandemic.
Brent crude was at $ 42.11 a barrel, down 55 cents, or 1.3%, after earlier sliding to $ 41.51. US West Texas Intermediate crude slipped 64 cents, or 1.6%, to $ 39.13 a barrel after earlier dropping to $ 38.55, the lowest since July 10.
The world remains flooded with crude and fuel despite supply cuts by the Organization of the Petroleum Exporting Countries (OPEC). They are known as OPEC +. It is also the government's attempt to stimulate the global economy and demand for oil.
As a result, refineries have reduced their fuel production and caused oil producers like Saudi Arabia to lower prices to offset falling demand for crude oil. This condition can be a good thing for several parties. However, it may continue to show its declining trend.
China Reduces its Intake
China, the world's biggest oil importer, slowed its intake in August and increased its product exports. It is according to customs data on Monday. There is so much uncertainty regarding the Chinese economy and their relationship with the major industrialized nations.
It is especially so with the US and today, even Europe. This is what Keisuke Sadamori, director of energy markets and security at the International Energy Agency, told Reuters. It is not an optimal situation that will overshadow the growth prospects nowadays.
World oil exporter Saudi Arabia cut its official October selling price for Arab Light crude, which has been sold to Asia since May. This situation suggests that demand remains weak in the market. Asia is Saudi Arabia's largest market by region until now.
In August, the OPEC+ group cut production cuts to 7.7 million barrels per day after global oil prices recovered from historic lows caused by the coronavirus pandemic that cut fuel demand. Oil is also under pressure as US companies increase drilling for new supplies.
