Market Update: Dollar Strength, Oil Price Rise, and Economic Data
The US dollar experienced significant gains this week, poised for its largest weekly increase in two months. This surge followed positive economic data released on Thursday, including stronger-than-expected figures for US economic growth, unemployment claims, durable goods orders, and wholesale inventories. The dollar index (USD), which tracks the greenbackS performance against a basket of six currencies, reflected this strength.
Market sensitivity,initially concerned about bilateral trade agreements reached wiht the Trump administration,has been tempered as these agreements haven’t proven as disruptive as initially anticipated.
Focus is now shifting to upcoming US economic data, specifically the release of consumer spending figures and inflation data measured by the Personal consumer Expenses Price Index (PCE) later on Friday. Investors are seeking further clues regarding the potential need for additional interest rate cuts by the Federal Reserve. A Reuters poll predicts the PCE will show a 0.3% month-over-month increase and a 2.7% year-over-year increase for August.
According to the CME Fedwatch tool, the probability of the federal Reserve holding rates steady next month has risen to 14.5%, up from 8.1% the previous day. Expectations for total rate cuts by the end of the year have also decreased, falling below 40 basis points.
The Department of Commerce reported a revised Gross domestic Product (GDP) increase of 3.8% for the period between April and June, exceeding the initially reported 3.3%. This upward revision surpassed economists’ expectations.
oil Market
oil prices are also on the rise,tracking towards a weekly increase of over 4%. This increase is largely attributed to disruptions in Russian energy infrastructure,leading Moscow to halt fuel exports.
Brent crude futures (LCOc1) were trading at $69.55 a barrel, up $0.13 (0.2%), while West Texas Intermediate (WTI) crude (CLc1) reached $65.14 a barrel, a gain of $0.16 (0.3%).
PVM analyst Tamas varga noted that the escalating geopolitical risk premium, fueled by intensified Ukrainian drone attacks, has materialized into a genuine supply shortage, notably impacting Europe’s distillate deficit. Both Brent and WTI are on track for their largest weekly gains as mid-June.
Russia announced a partial ban on diesel exports until the end of the year, expanding its existing ban on gasoline exports. This decision follows a decline in refining capacity, which has led to fuel shortages in several Russian regions.
NATO’s warning regarding potential responses to further airspace violations has heightened tensions related to the war in Ukraine and raised the possibility of additional sanctions targeting the Russian oil industry, according to ANZ analyst daniel Hynes.
Positively, oil flow from the iraqi Kurdistan region to Turkey is expected to resume on Saturday, as confirmed by two officials from the Iraqi Ministry of Petroleum.
However,the strong US GDP growth of 3.8% annualized in the last quarter is expected to partially limit oil price gains.
