Oil prices steadied after the sharp rally yesterday. Escalation of Middle East tensions and a fire in a Texas refinery sent concerns over supply disruption. The ECB meeting was a non-event with President Draghi stating that there was no discussion about the cutting the policy rates at the meeting and activation of the OMT rests on governments’ determination. The FOMC minutes stated that key reasons for the decision to implement QE3 were the deterioration in the global economic outlook and manageable cost of QE3. Policymakers had a vigorous discussion about shifting from calendar date-based policy targets toward data-driven thresholds.

News reported intensification of Turkey’s retaliation acts against Syria as Turkey's parliament approved a bill allowing the military to have cross-border operations into Syria. Attack was reported on a Syrian border town with some Syrian soldiers killed. Turkish Prime Minister Tayyip Erdogan stated that the country just wanted “peace and security” but not war. Elsewhere in the US, a fire broke out at a refinery in Texas operated by Exxon Mobile. The refinery has capacity of 584K bpd, the largest in the US. Exxon admitted that there would be some impact on production, although it would "meet its contractual agreements”.

At the ECB meeting policymakers affirmed that the OMT would be a 'fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability' in the Eurozone. On Spain, President Draghi also commented on Spain's fiscal consolidation progress, praising the countries' 'significant progress' in addressing its problems. He also indicated that the OMT is ready if needed, but 'now it's really in the hands of governments', suggesting the central bank is waiting for the Spanish government's request for financial assistance. Regarding the conditionality issue, he stated that 'there is a tendency to identify conditionality with harsh conditions' and 'conditions don't need to be necessarily punitive'.

Concerning the FOMC minutes, policymakers unveiled that key reasons for the decision to implement QE3 were the deterioration in the global economic outlook and manageable cost of QE3. Members also discussed on whether the purchase program should be Treasury-based or MBS-based. The decision on choosing the latter was partly because it would more directly help the housing sector. Yet, the program was not a unanimous one as 'a number of participants highlighted the uncertainty about the overall effects of additional purchases on financial markets and the real economy'. Also, 'several participants' noted concerns that the program might complicate the eventual withdrawal of policy accommodation. Policymakers discussed on a crucial issue about shifting from calendar date-based policy targets toward data-driven thresholds. Yet, the change is not without challenge. Some concerned that using the explicit numerical thresholds would be 'too simple to fully capture the complexities of the economy and the policy process or could be incorrectly interpreted as triggers prompting an automatic policy response'. The central bank pledged to do 'further work' related to better communications with the public.

Oil and Gold Reports contributed by Oil N' Gold