Market Update

At the onset of the week, all eyes were on the oil market following the drone attack on Saudi Arabia's oil facilities on September 15, 2019, which crippled half of their oil production, approximately 5.7 million barrels per day, constituting about 5% of the global daily supply.
Initially, this attack significantly drove up crude oil prices on September 16, 2019. However, it's crucial to note that even at its peak, just shy of $70 per barrel, Brent crude had merely returned to the levels observed at the end of May 2019.
The situation swiftly changed on September 18, 2019, when news broke that Saudi Arabia had already restored half of its lost oil production and aimed to return to pre-attack levels by the end of September. This development promptly deflated oil prices, which was a positive turn of events. Higher oil prices, akin to an additional tax on incomes, could have worsened the ongoing global economic slowdown by hindering economic growth.
On the same day, the Federal Reserve in the US made a widely anticipated 0.25% cut in interest rates, bringing the range to 1.75%-2.00%. The accompanying statement, however, surprised and disappointed many, indicating a hawkish stance. Despite this, given the current economic uncertainties and mounting risks to global economic growth, it's likely that the Fed's position will be challenging to maintain. Further monetary policy easing, including interest rate cuts and additional quantitative easing, is anticipated in upcoming policy meetings to counter these challenges.
In the UK, the Bank of England opted to keep interest rates unchanged at 0.75%. Nevertheless, they acknowledged weak inflation and business investment, aligning with the belief that UK interest rates should be lowered. However, the Bank reiterated their previous stance that "gradual and limited" interest rate increases might occur in the event of a smooth Brexit, intending to control inflation. This approach seems counterintuitive as a smooth Brexit would likely strengthen the pound, leading to deflationary effects as imported goods become cheaper. Additionally, recent Consumer Price Index (CPI) data revealed a slowdown in inflation, dropping to 1.7% from 2.1%, well below the Bank of England's 2% target. Core CPI, excluding volatile items like food and energy, also slowed to 1.5% from 1.9%.
Looking ahead to the upcoming week, major data releases are limited. The focus will primarily be on the US and Eurozone Purchasing Managers' Index (PMI) data, along with the US Personal Consumption Expenditures (PCE), the Federal Reserve's preferred inflation measure. These indicators will be closely watched for insights into the global economic landscape.