Crude Oil Dips As US Dollar Finds Firmer Footing Ahead of CPI
Crude Oil Dips as US Dollar Finds Firmer Footing Ahead of CPI
The dollar has reclaimed its throne as the global currency of choice after a brief pause following an epic rally in the first half of the year. This isn’t entirely a surprise as inflation continues to creep above the Fed’s 2% target and interest rates are expected to rise in the coming months.
A weaker greenback – a good thing for consumers, but not so good for the economy – helped drive up crude prices to an all time high of $115 per barrel in May. But a tepid recovery in China’s three-day Mid-Autumn Festival holiday, renewed COVID-19 curbs and an impending European Union ban on Russian refined products are all weighing on supply.
Bigger picture: While the greenback is not likely to see a massive decline anytime soon, a combination of softer Fed rate hike bets and the aforementioned COVID 19 restrictions may well keep prices from climbing. Meanwhile, the Fed’s latest tally of its balance sheet will be released in the next few days, along with the latest US economic data.
Despite the recent surge in the US Dollar, the most interesting development may be the Fed’s dovish turn, with the recent Richmond FOMC meeting highlighting the potential for a change in course, or at least a move from the more hawkish to more dovish side of the equation. In addition, the upcoming US and European data releases will be closely watched to determine whether or not the greenback can hold its own with the big boys on the other end of the spectrum.