It has been a big day for crude oil trading. US crude took the early lead but UK crude staged a strong catchup rally later in the day. The morning was dominated by US crude which rallied on expectations of a stronger economy supported by better than expected ADP payrolls and a big drawdown in US crude oil inventories. UK crude had underperformed in the morning then stormed back in the afternoon on reports of a possible coup in Egypt. Gasoline benefitted today from both inventories and a resurgence in political risk pricing gaining 1.8%. Compared with 2011, the rally in crude off of Egyptian turmoil has been limited. The spread with US crude hasn’t expanded by very much which suggests things are different this time in two key ways. First, we have been down this road before. There was little disruption to Egyptian oil production the last time the government was overthrown and it remains in everyone’s best interest to keep the taps running. Second, with Europe convulsing again over reforms in Greece and political turmoil in Portugal, the risk of a shortfall in demand appears to outweigh the risk of a shortfall in supply at the moment. Stock market action on the day was mixed. US indices closed higher on a short trading day ahead of tomorrow’s holiday, while European indices traded lower though the day as the EU’s problems moved back to the front burner. They even overshadowed more signs of progress from Spain. European markets were able to claw back some of their early losses, however, while EUR bounced back from an early breakdown to hold near $1.3000. Currency markets have seen renewed flows of capital back into defensive plays, particularly JPY and CHF. Even gold was able to mount a small rally, retaking $1,250. AUD has been under the most pressure again overnight after RBA governor Stevens indicated that the central bank feels the Dollar had been too high in recent years and may continue before the economy rebounds. The street appears to be taking this to mean the RBA won’t stand in the way of further declines and could even help it along with additional interest rate cuts. The next big test for AUD appears near $0.9000. With the US closed on Thursday and a military coup apparently underway in Egypt, crude oil could remain active through the trading day. Traders may also position ahead of Thursday’s European central bank meetings. In the UK, it’s Mark Carney’s first meeting at the helm of the Bank of England. Although no changes to policy are expected, traders may look for any statements on future direction. GBP has been strong today on the back of another better than expected PMI report, this time on the service side. The ECB is expected to stay the course but traders may look to them to try to calm nerves over the deteriorating situations in Portugal and Greece. Economic NewsHighlights of overnight announcements include: Australia PSI 41.5 vs previous 40.6 Singapore Electronics index 51.2 vs street 51.0 Singapore PMI 51.7 vs street 51.0 US Challenger layoffs 39.4K up 4.8% over year vs previous 36.4K US ADP private payrolls 188K vs street 160K vs previous 134K US jobless claims 343K vs street 345K US trade balance ($45.0B) vs street ($40.1B) Canada trade balance ($0.3B) vs street ($0.7B) US crude oil inventory (10.3 mmbbls) vs street (2.2 mmbbls) US gasoline inventory (1.7 mmbbls) vs street 0.7 mmbbls US natural gas storage 72 BCF vs street 74 BCF Poland interest rate decision 25 bps cut to 2.50% as expected Sweden interest rate decision 1.00% no change as expected Spain service PMI 47.8 vs street 47.6 Italy service PMI 45.8 vs street 47.0 France service PMI 47.2 vs street 46.5 Germany service PMI 50.4 vs street 51.3 UK service PMI 56.9 vs street 54.5 Eurozone retail sales (0.1%) vs street (1.9%) Upcoming significant announcements include: 11:30 am AEST Australia building approvals street (0.1%) 12:00 pm BST UK interest rate decision rate 0.50%, QE £375B no change expected 12:45 pm BST ECB interest rate decision 0.50% no change expected