Oil prices fell on Thursday, giving up the gains made in the previous session when they reached a seven-week high. The decline came as some investors booked profits following a drop in US equities, amid expectations of weaker winter demand and the resumption of Kurdish supplies.

Brent futures fell by 49 cents, or 0.7%, to $68.82 a barrel by 08:25 GMT, while US West Texas Intermediate (WTI) crude slipped 54 cents, or 0.8%, to $64.45.

Both benchmarks had climbed 2.5% on Wednesday to hit their highest levels since August 1, supported by a surprise weekly drawdown in US crude inventories and concerns that Ukrainian attacks on Russian energy infrastructure could disrupt supplies.

Giovanni Staunovo, commodity analyst at UBS, said: “We are seeing a market generally shifting toward risk aversion,” adding that two consecutive days of losses in US equities were weighing on oil prices.

Expectations of additional supply also pressured the market, with more flows anticipated soon from Iraq and Kurdistan. Priyanka Sachdeva, senior analyst at Phillip Nova, noted: “The return of Kurdish supplies revives fears of an oversupply scenario, pushing prices lower after nearing a seven-week high.”

Oil flows from Iraq’s Kurdistan region are expected to resume within days, after eight oil companies reached an agreement on Wednesday with the federal government and the Kurdish regional government to restart exports.

While concerns about Russian supply disruptions persist, Haitong Securities said in a report that another factor behind oil’s recent resilience was the absence of strong pressure from supply-demand fundamentals. The report added that with peak demand season gradually ending, prices have yet to reflect expectations of rising oversupply pressures.

Highlighting investor caution on demand, JPMorgan analysts said on Wednesday that US air passenger data for September showed only a marginal 0.2% year-on-year increase, compared with 1% growth in each of the two prior months.

They added: “Similarly, gasoline demand in the US has begun to decline, reflecting a broader trend of slowing travel patterns.”

The US dollar has not advanced this week on the back of war drums or geopolitical tensions. Instead, it continues to edge higher for more ordinary but equally persistent reasons: there simply hasn’t been enough “fuel” for the bears to justify short positions at the week’s opening levels. Traders hoping for a flow of weak US data to support dollar selling instead found an “empty plate,” and that absence alone has underpinned the greenback.

One-week G10 funding rates still grant the dollar a 4.14% annualized yield — hardly an incentive to stay short. (This explains why players have remained in narrower ranges over the past two weeks.) Adding to this, US housing data showed new home sales jumping back to early-2022 levels, forcing the market to acknowledge that slowdown is not yet the main narrative. Even Fed Funds pricing — which bottomed in mid-September — has ticked up by 5 basis points. A modest move, but enough to show that the “cut 50 bps now” camp is not in control.

Today’s data slate includes jobless claims and existing home sales. Jobless claims are expected to fall again to around 230,000, erasing the earlier spike to 264,000 (later revealed to have stemmed from fraud in Texas). A steady labor market is not the kind of feed bears can use against the dollar. Existing home sales may come in weaker — consensus at 3.95 million units annually — but that is unlikely to draw much attention after the “surge” in new homes.

Meanwhile, eight Fed speakers are lined up like actors on a crowded stage. Steven Miran is expected to reprise his familiar role as an “ultra-dovish hawk,” pushing for faster and deeper cuts. But the market knows his script well; his voice alone won’t move the dollar unless a broader “chorus” of Fed officials joins in.

The dollar index (DXY) hovers near 98, like a ship stuck in still waters. Without softer US data to provide the bears with wind, the dollar remains stagnant, frustrating those who bet on its decline.

As for the euro, its latest slide looked more like “local data disappointment” than genuine dollar strength. German Ifo readings burst the bubble of optimism, reminding markets that “fiscal stimulus” often resembles creative accounting more than fresh spending. Europe may find firmer ground later, but patience is required. With no ECB headlines today, EUR/USD stays at the mercy of US flows. A break below 1.1725 could open the way to 1.1675, though buyers remain “lurking in the shadows.”

The Japanese yen stays in the market’s crossfire. It managed a modest rebound after BoJ minutes reiterated willingness to raise rates “someday,” but that was hardly new. The spotlight instead fell on “Japanese political kabuki,” leaving the yen hostage to domestic developments. USD/JPY held its rebound, but its technical outlook remains bleak unless the US delivers a string of stronger-than-expected data.

For now, the US dollar retains the upper hand not because it has seized power with overwhelming force, but because the “opposition” is too weak and divided to mount a serious challenge. In markets, inertia can sometimes be the most powerful force of all.

Gold prices rose in the European market on Thursday, resuming gains after pausing yesterday, and moving closer to all-time highs. The advance came as the US dollar halted its climb against a basket of major currencies.

With Federal Reserve officials adopting a more cautious tone, the likelihood of two US interest rate cuts before the end of this year has diminished. To reprice those expectations, investors await key US economic data later today.

Price Overview

• Gold prices rose by about 0.7% to $3,761.66, from the opening level of $3,736.06, after hitting a low of $3,729.62.

• On Wednesday, gold settled down by 0.75%, marking the first loss in four sessions, as profit-taking pulled it back from an all-time high of $3,791.13 an ounce.

US Dollar

The dollar index fell by 0.1% on Thursday, retreating from a two-week high of 97.92 points, reflecting the pause in the US currency’s advance against major counterparts.

Beyond profit-taking, the US dollar weakened as investors avoided building additional long positions, preferring to wait for further clues on the Fed’s interest rate path.

US Interest Rates

• Fed Chair Jerome Powell said on Tuesday that the central bank will continue to balance concerns about a weakening labor market with mounting worries about inflation.

• According to the CME FedWatch tool, the probability of a 25-basis-point rate cut at the October meeting is currently priced at 92%, while the chance of leaving rates unchanged stands at 8%.

• Investors are awaiting key US data later today, including second-quarter GDP and weekly jobless claims, to reassess these expectations.

Outlook for Gold

Brian Lan, managing director of Singapore-based GoldSilver Central, said: “I don’t think inflation data will have much of an impact on gold unless it’s exceptionally high.” He added: “From our quantitative market view, the long-term outlook remains very positive.”

SPDR Fund

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 3.72 metric tons on Wednesday, bringing the total to 996.85 metric tons, down from 1,000.57 metric tons — the highest level since August 3, 2022.

The Swiss National Bank announced its interest rate decision on Thursday morning, following the September 25 meeting. The bank kept rates unchanged at 0.00%, the lowest level since June 2022, in line with market expectations. This marks a temporary pause in the monetary easing cycle, which had continued over the past six consecutive meetings.

• This statement is “positive” for the Swiss franc.