Iraqi Tensions Impact Oil Prices, UK Inflation at Highest Since 2012

On Monday, Iraqi forces moved to take control of the city of Kirkuk that had been under control of a Kurdish faction since 2014 and had recently voted for independence in a referendum with Baghdad objections. Kirkuk is home to over 10% of Iraq’s oil reserves and the “takeover” brought concerns to the markets regarding supply disruptions, which helped pushed WTI up to a 3-week high before retracing overnight.

The Reserve Bank of Australia released the minutes of their October 3rd meeting earlier today. The minutes reveal that the RBA appears to be in no hurry to hike interest rates, as many of its global peers are moving towards reducing monetary stimulus. The RBA noted that recent data pointed to reduced price pressures with a relatively strong labor market expected to support the higher consumer spending that is restricted by slow growth in real wages and high levels of household debt. Whilst the Australian economy is improving, it is evident that the RBA is not thinking about raising interest rates anytime soon. AUDUSD is little changed in the early Tuesday trading session at 0.7857.

On Monday, Spain’s deputy prime minister, Mrs. Soraya Sáenz de Santamaría, says that Catalonia’s leader didn’t give an adequate response to his letter about the region’s independence and has until Thursday to comply with the country’s laws. Catalonia Leader Puigdemont’s letter issued two hours before a Monday deadline and didn’t clarify whether he, in fact, declared Catalonia’s independence from Spain. He called for talks with Spain’s government. Puigdemont now has until Thursday to give a response – the Spanish Government wants a simple “yes” or “no” – before Spain could activate Article 155 of the Constitution, which would allow the central government to take over parts of Catalonia’s self-governance.

At 09:30 BST, UK National Statistics released its Consumer Price Index (YoY) for September. UK inflation is at the highest rate since April 2012 at 3.0% from the previous release of 2.9%. The figure of 3.0% puts pressure on the Bank of England to raise UK interest rates sooner rather than later.

EURUSD is 0.25% lower in early trading. Currently, EURUSD is trading around 1.1767.

USDJPY is little changed overnight, currently trading around 112.15.

GBPUSD is unchanged from Monday’s close to currently trade around 1.3266.

Gold is 0.8% lower overnight, currently trading around $1,292.50.

WTI gave back Monday’s gains to trade 0.5% higher in early Tuesday trading. WTI currently trades around $52.13.

Major data releases for today:

At 14:15 BST, the Board of Governors of the Federal Reserve will release Industrial Production (MoM) for September. The last release was greatly affected by the Hurricanes and came in at -0.9%. With the rebuilding process well underway and many factories back in operation, the release is expected to show a positive figure of 0.2% for September. A positive figure will be seen as inflationary and will help the Fed in justifying a rate hike before the end of the year.

This article is written by FxPro

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Ed Anderson

Ed Anderson has over 35 years of experience in the financial markets, having worked in London, New York, Toronto, Singapore & Australia. His early career saw him as an Interbank Trader, Futures Trader & Voice Broker before he moved to electronic trading in the early 2000s. With extensive knowledge of leverage platforms and instruments and as the Chief Market Strategist at FxPro, Ed provides in-depth Fundamental and Technical Analysis, as well as frequent market insights on multiple asset classes, to the benefit of FxPro clients.