The Shifting Oil Trade
Geopolitical risk in the Middle East has begun to dominate proceedings, forcing markets to explore the two avenues of approach for FX trades. Firstly, the general risk-off tone prevailing through markets is expected to extend, and the usual ‘safe haven’ currencies are benefiting. Secondly, fears of oil price movements adverse to economic conditions are also rising. In the past, both channels generally led to similar trades. While significant convergence remains the case, we note that exceptions may increase in the current environment, due to the evolution of policy and structural changes in global energy balances.
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