On Monday the Euro struggled near a four-week low of 1.1831 versus the US Dollar after German Chancellor Angela Merkel won her country’s elections over the weekend but saw a chunk of support shift to the far right. The common currency faced additional pressure after European Central Bank President Mario Draghi singled out currency volatility as a source of uncertainty that required monitoring and argued that “ample” ECB accommodation was still needed, because a premature and hasty move could unravel its work.
On Tuesday, Oil prices extended gains early with Brent Crude hitting a 26-month high of 59.49, supported by Turkey’s threat to cut Crude flows from Iraq’s Kurdistan region to the outside world. The landlocked Kurdish enclave can ship as much as 700,000 barrels a day through the pipeline to the Turkish port of Ceyhan on the Mediterranean; that quantity of Crude coming out of the supply chain would be fairly significant. Brent’s rise meant it extended gains for a fifth straight day, jumping from just over $55 a barrel a week ago, as OPEC and non-OPEC producers confirmed the market was well on its way toward rebalancing, while Oil demand looked strong.
Meanwhile, the Yen firmed against the US Dollar after tensions on the Korean peninsula flared-up anew amid an escalating war of words between North Korea and the United States and as investors awaited fresh signals about the US monetary policy outlook.
Janet Yellen was scheduled to speak later on “Prospects for Growth: Reassessing the Fundamentals”. Federal Reserve Chair said that the Fed needs to continue gradual rate hikes despite broad uncertainty about the path of inflation.