Summary:

• Oil gains modestly in early trading after OPEC/non-OPEC meeting in Oman
• Turkish lira declines as tensions in Syrian region Afrin exacerbate
• US government shutdown began on Saturday, another try to advance a stopgap spending bill today

The beginning of this week’s trading has been quite calm as major currencies are trading more or less at the same levels as they were on Friday’s close. On the other hand increased volatility was seen at the start of the week on the Turkish lira following mounting geopolitical tensions, however let’s begin with the oil market.

Oil ministers from some OPEC countries along with Russia confirmed after the meeting in Oman this weekend that they will stick with oil production cuts until the end of the year in order to remove a global excess of crude and they also signalled their readiness to cooperate beyond that. Notice that there were some hopes before the meeting that the OPEC and other participating in the deal countries could consider an exit strategy as the global oil inventories are getting closer to their 5-year average, nevertheless all countries refrained from sketching out any details on a possible exit. According to Saudi Energy Minister Khalid Al-Falih producers should keep limits on output through 2018 as the market may re-balance at the end of the year or in 2019. On the other hand neither minister said if the output cuts would continue in the following year.

WTI oil prices drew their first bearish candlestick at a weekly time frame since the start of December last year. Therefore, one may count on a possible retreat at least toward a black trend line, however the OPEC/non-OPEC verdict should act in favour of the price going forward. Source: xStation5

Looking beyond the G10 basket one needs to underline the Turkish lira as it declined heavily at the opening on Sunday. The reason is still the same – mounting geopolitical concerns. Turkish warplanes began massive bombing of US-backed Syrian Kurds on Saturday targeting Syria’a Afrin. Furthermore, Turkish ground troops crossed into northern Syria yesterday in order to push out Kurdish militia which President Recep Erdogan regards as terrorists being an important security threat to Turkey. Notice that the military operation has been called “Olive Branch” and the Turkish push could exacerbate already weak relations with the US leading to another sell-off of the domestic currency. At the time of writing the TRY is losing 0.2% against the US dollar but it was much weaker just after the market open. 

The EURTRY could continue sliding given the current technical view. The first target for bears could be set at 4.6060 but another outburst of tensions could weaken the TRY again. Source: xStation5

Finally let us recall that the US Congress was unable the vote for a stopgap spending bill on Friday and therefore a government shutdown began officially on Saturday. The reaction on the US assets has been negligible so far and it’s unlikely it could bring more long-lived repercussions. Notice that there are reports that a bill is to be voted for later today but there have been no an official confirmation yet.