U.S. futures and European stocks are modestly lower, following a mostly green Asian session, amid growing jitters over today's 2pm announcement by President Trump in which he will unveil the fate of the Iran nuclear deal.
Ahead of Trump's much anticipated announcement this afternoon, it has been a case of sell the rumor and the news (for reasons Barclays explained overnight), with oil prices retreating from three-and-a-half year highs as investors weighed competing views on whether the U.S. will reimpose sanctions on OPEC producer Iran and the potential consequences of such a decision: as Bloomberg recaps, while foreign officials and analysts say Trump is likely to remove the U.S. from the pact, the president may also surprise allies by agreeing to stay in the accord a while longer as American and European diplomats forge side deals aimed at addressing his concerns.
As a result, there was some profit-taking as WTI dipped back under $70.00/bbl level following reports that European powers are close to a package deal to try and persuade Trump not to withdraw from the Iran deal; however, subsequent reports suggest that Trump may be inclined to dropping out of the agreement when he announces his decision at 2pm ET today.
Complicating matters, the potential fallout from a US withdrawal in the oil market is unclear. While consultant FGE is among industry watchers who have said renewed U.S. measures may cut production from OPEC’s third-largest member, Barclays Plc sees Iran’s output little changed in 2018, while RBC notes that “Iran’s exports could be cut by 200K bpd to 300K bpd” if the US restores sanctions. How European and Asian oil buyers deal with possible American action, as well as the effect on OPEC’s output curbs aimed at shrinking a global glut, will also be watched.
“Reaching the $70 milestone gave investors a sense of accomplishment and triggered profit-taking,” Satoru Yoshida, a commodity analyst at Rakuten Securities Inc., said by phone from Tokyo. Still, “oil is trading around $70 as the market is factoring in the possibility that the U.S. will unilaterally terminate the Iran deal and reimpose sanctions.”
Overnight Barclays published the following timeline of how we got here, and what happens next:
There was less confusion about the dollar, which continued its torrid surge since the April 17 PBOC RRR cut, rallying steadily for most of the overnight session across G-10 with the DXY hitting another high for 2018; meanwhile no fresh comments from Fed Chair Powell who spoke early in Zurich and hinted that EMs are on their own, led to a continuation of recent trend. The dollar climbed after erasing an earlier decline. The Bloomberg Dollar Spot Index rose for a third day to reach its highest level since December.
Across other G-10 currencies, the biggest slide was seen in the Canadian dollar, followed by fellow commodity currency the Australian dollar. Sterling headed...