Weekend Review: Brexit Worries and OPEC Cuts Dominate the Weekend

On Friday, the United Kingdom released the GDP numbers for the second quarter. The numbers were in line with the expectations. On an annualized basis, the economy expanded by 1.5% in the third quarter. This was higher than the growth of 1.2% in the second quarter. The manufacturing data showed improvements in the sector. Manufacturing production rose by 0.2%, which was higher than the expected 0.1% while the industrial production too beat the estimates. On the same day, the US released PPI numbers that showed an increase by 2.9%. This was higher than the estimated 2.5%.

This weekend, the biggest news was on crude oil. Saudi Arabia announced that it will cut production by 500K barrels per day. This was big because of its impacts to the price of oil. It was also big because the news may mean a confrontation with Russia, which favors supply increase with the aim of stabilizing oil prices. The news saw the price of crude oil jump in the Asian session today. The supply cuts by Saudi will also more friction with the US, which supports low oil prices.

Another big news this weekend was the Armistice event in France. This was an event that brought together leaders from Europe and North America to celebrate 100 years after the first world war. While there was no major market-related news during the event, the key highlights were Emmanuel Macron’s tough speech defending globalism. This was in response to Donald Trump’s America First policy and his nationalism stand.

It was big news for mergers and acquisitions after SAP announced that it would acquire Qualtrics. The $8 billion deal was announced a few days before the company was scheduled to unveil its IPO. Europe’s biggest IT company will pay $8 billion in cash to the company, which will make the two brothers that founded it billionaires. The goal of this deal will be to solidify SAP’s standing in the customer relations industry that is currently dominated by Salesforce and Microsoft. The risk for SAP is that the company will not be a perfect match for its style. In the past, when large companies acquire high-flying tech startups, they often get lost. A good example was Microsoft’s acquisition of Skype.

Brexit was another big news this weekend. It was reported that four ministers who support the UK remaining in the EU are looking to quit the cabinet. Tory leadership also seemed to support calls for another Brexit referendum after Jeremy Corbyn announced earlier that this was not possible. All this comes a week after traders remained optimistic about a new deal. In addition, Theresa May continue to face challenges within her conservative party, with many members opposing her version of Brexit. All this led to increased volatility in the GBP/USD pair as shown below.

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