The oil price is stuck in a tight trading range today as worries about the global economy surfaced placing equity markets were under pressure and raising uncertainty over how many interest rate cuts the US Federal reserve will deliver this year.
Some of this uncertainty may be relieved later today by a speech from Federal Reserve Chair Jerome Powell in Jackson Hole, Wyoming, where he is expected to lay out US monetary policy going forward and likely hint at the amount of rate cuts the Fed is likely to deliver.
“The market will be shifting focus today to broader based macro headlines with comments out of Jackson Hole likely to be prioritized in this regard,” said Jim Ritterbusch, president of Ritterbusch and Associates.
“While we are not expecting any dramatic developments capable of swinging the equities either way by more than 1% or so, we feel that current bullish momentum in the oil market could allow the energy complex to absorb bearish guidance much easier than any negative Jackson Hole guidance that may be forthcoming” he added.
Powell has been fairly bullish about the US economy of late which has caused the US dollar to surge which is usually negative for gold as it raises the price of the commodity for holders of other currencies.
US President Donald Trump has been a vocal critic of the Fed chairman in recent month’s by reiterating the need for lower interest rates and squarly pointing the blame at Powell for keeping them at current levels.
He may succumb to the pressure today and turn slightly dovish which may set oil up for some sort of rally.
"If Powell talks about lower for longer and reverses some of the hawkish comments that we heard from Fed members earlier this week, we could see it supporting oil," said Michael McCarthy, chief market analyst at CMC Markets in Sydney.
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