As a new trading begins, there’s a lot on our plate to focus on. Honestly, I have difficulty remembering whether we could really enjoy a calm week lately.
Last week took off with Saudi Arabia oil attacks, and then continued with the Fed rate decision. And this week New York hosts UN Climate Change Summit 2019 New York this week.
It can be observed that the market have shaken off the side effects of the recent Saudi Arabia oil attacks, for the moment. Unexpectedly, Brent crude oil price per barrel fell down before it begins its upward climb towards $80 per barrel as it did in October last year. Tensions may not escalate unless the United States decides to impose further sanctions, even a military intervention, against Iran, obviously except for sanctions that have already taken effect. But, it’s difficult to guess what’s going to happen next, especially in the current conjuncture.
On the other hand, we notice that Trump has been making more moderate statements ever since the Fed cut rates by 25 bps. Except that he said, “The Federal Reserve should get our interest rates down to zero, or less” It’s very likely that Trump or his team have finally understood that it is impossible to make dollar depreciate just be cutting rates since dollar is not only the currency of American but it is an international medium of exchange, a store of value, or at least I hope so.
“If we slack off again, we will miss a great opportunity…”
As I have mentioned in my earlier reports, the fact that the Fed cut rates recently may shape public perception into the possibility that risks will increase in the medium term. Accordingly, this recent cut may help investors make a final decision, considering they were hesitant about whether they should sell their assets or not. In such case, parity would show a sharp downward trend as transactions with less money would increase the volatility and because of those who would want to buy dollars with the liquidity they got from recent sales.
The only thing to reverse this situation would be that the Fed would switch to monetary expansion again. Such decision, however, could probably result in many complications. A global monetary expansion may cause EU countries to slack off just like developing economies. However, Turkey as well as all other developing countries has a lot of homework to do. A new monetary expansion would lead to a delay in structural reform efforts.