Oil prices rose 2.5% in European trade off eight-month lows plumbed yesterday, and on track for the first profit in three days on forecasts OPEC Plus might cut production to boost prices.

Prices were also buoyed by a slowdown in US output due to a series of hurricanes in the southern region.

Global Prices

US crude rose 2.5% to $78.37 a barrel, while Brent climbed 2.25% to $85.86 a barrel, after US crude lost 3.8% on Monday, hitting eight-month lows at $76.28, while Brent fell 3.3% to $83.71 a barrel. 

Oil prices sustained these heavy losses as the US dollar spiked against major rivals, hurting high-risk assets. 

OPEC Plus

Iraq's oil minister said today that OPEC Plus is monitoring prices closely and is seeking to rebalance them.

Such statements paved way for forecasts the oil cartel might cut output this year to maintain balance. 

Mexican Gulf

Major oil companies BP and Chevron were forced to close production in maritime rigs in the Mexican Gulf amid approaching storms. 

The Mexican Gulf represents 17% of total US crude output, which topped at 12.1 million bpd recently, a two-year high.

UK 10-year treasury yields tumbled today after marking the best gains in six months yesterday, hitting 12-year highs past 4%. 

The main reason behind such stunning developments is the UK government's new financial stimulus plan to bolster growth in the country.

Such plans triggered concerns that the government might not be able to sustain its debts in the medium and long terms. 

Bond Yields 

UK 10-year treasury yields fell 3.5% today on track for the first loss in seven sessions on profit-taking. 

The yield surge 11.5% yesterday, the biggest gain since March, hitting 12-year highs at 4.267% after quickly blowing through 4%. 

The yields are now up 131 basis points since September and on track for the largest monthly increase on record.

Financial Stimulus 

The UK government announced a patch of tax cuts and investment stimuli to support growth, noting it's the largest package of tax cuts in the UK since 1972, that covers employees and corporations.

The government is also aiding families and corporations against the rising fuel costs by 60 billion pounds in the next six months.

Markets are now betting the government won't be able to pay back its debt at the same time the BoE is refusing to increase interest rates by sufficient amounts, leading to the pound's selloff.

Financing The Plan

The massive stimulus plan, which include 45 billion pounds of tax cuts, and 60 billion pounds for energy support to families and corporations, will be financed by loans. 

This comes at a time when Bank of England is planning to sell bonds valued at 80 billion pounds next year to cut down its overall budget. 

An Economic Dilemma 

Goldman Sachs' analysts believe the crisis in the UK is derived from the contradiction between monetary and financial policies. 

Launching an ultra easy monetary policies through tax cuts and fuel aid is aimed at preventing recession and improving productivity. 

However, Bank of England is going the opposite way, by tightening policies and raising interest rates to control runaway inflation.

If the pound continue to suffer like so, analysts expect Bank of England to hold an emergency meeting to raise interest rates by an even steeper amount, adding pressure on UK official bonds. 

Gold prices rose over 1% in European trade off 29-month lows on track for the first profit in four days as the dollar stalls against major rivals. 

The greenback gave up two-decade highs on active profit-taking and ahead of an important speech by Fed chair Jerome Powell that will include clues on the future of monetary policy in the US.

Prices Today

Gold prices rose 1.1% to $1,640 an ounce, after losing 1.3% yesterday, the third loss in a row, hitting 29-month lows at $1,621 an ounce as the dollar spiked against major rivals. 

The Dollar Index

The dollar index fell 0.6% on Tuesday off 20-year highs at 114.53, on track for the first loss in three sessions against a basket of major rivals.

The gains come ahead of an important speech by Fed Chair Jerome Powell later today, expected to shed light on the future path of monetary policies and interest rates in the US.

The Fed already asserted at last week's meeting its readiness to combat inflation by aggressive tightening monetary policies and hiking rates.

The SPDR 

Gold holdings at the SPDR Gold Trust fell 3.76 tones yesterday, the seventh decline in a row to a total of 943.47 tones, the lowest since March 2020.

Sterling rose in European trade above record lows against dollar on active short-covering and as Bank of England pledged to monitor markets and support the currency.

The greenback gave up record 20-year highs on active profit-taking ahead of Fed Chair Jerome Powell's speech at an economic event in France. 

GBP/USD rose 1.4% to 1.0836, with a session-low at 1.0649, after losing 1.55% yesterday, the fifth loss in a row, hitting a record low at 1.0348.

The UK government announced a patch of tax cuts and investment stimuli to support growth, noting it's the largest package of tax cuts in the UK since 1972, that covers employees and corporations.

The government is also aiding families and corporations against the rising fuel costs by 60 billion pounds in the next six months.

Markets are now betting the government won't be able to pay back its debt at the same time the BoE is refusing to increase interest rates by sufficient amounts, leading to the pound's selloff.

Bank of England

Bank of England pledged to monitor markets and take appropriate steps to support the currency and stave off the decline in UK bonds, while expected to hold an emergency meeting this week to hike interest rates once more. 

The Dollar Index

The dollar index fell 0.6% on Tuesday off 20-year highs at 114.53, on track for the first loss in three sessions against a basket of major rivals. 

The gains come ahead of an important speech by Fed Chair Jerome Powell later today, expected to shed light on the future path of monetary policies and interest rates in the US.