Oil Shocks Down
Last week – counting from the previous week’s close to Friday’s close – saw a $10 increase in the price of a barrel of oil. This morning, after the weekend opening, prices returned to levels as if the previous week had not happened. What caused oil to drop so much? As odd as it sounds, the answer “nothing” is a good clue. The key was the lack of escalation of actions.
It was enough to pause offensive actions to give diplomats a chance. Interestingly, this announcement is, of course, backed by pressure on Iran and further threats in case the escalation fails. It’s not entirely clear what else the U.S. can do. However, it is known what it theoretically cannot do if the Senate does not pass a new funding package for this military operation. With improving sentiment in the oil market, capital is also flowing into developing countries – including Poland. The euro is approaching 4.31 PLN for the first time in over two weeks.
Economic Indicators
On Friday we saw the results of economic indicators in major economies. From our point of view, the eurozone and the United Kingdom were the most interesting. In both cases, the industrial and services indices clearly exceeded expectations. Moreover, both clearly exceeded the 50-point level, which symbolically separates positive from negative responses.
Across the Atlantic, the industrial index performed worse than forecasted, while services performed much better. However, we must consider that even though industry showed a lower result than expected, optimism in the U.S. remains clearly higher than on the old continent.
Waiting for the Fed
On Wednesday the Federal Open Market Committee will decide on interest rates. The chances of a hike have recently risen and currently exceed 30%. Most analysts, however, believe rates will only rise in September. Interestingly, many predict that by December we may see a second hike. How does this affect the currency market?
The more investors believe in rising rates, the better for the dollar. On the other hand, potential calm in the Middle East works against the U.S. currency, which we experienced this morning.
Of course, it must be remembered that a dollar strengthened by Fed decisions will absorb capital from emerging markets – including Poland – which will negatively affect the zloty.
Today’s macroeconomic calendar worth noting includes:
14:30 – USA – durable goods orders.
