Oil prices gain ground on global supply concerns
Global oil prices rose in European trade on track for the second profit in a row, with US crude approaching its highest level this year, while Brent traded above $86 a barrel on current global supply concerns.
Ukraine continues to intensify its drone attacks against Russian oil refineries, while the ongoing Red Sea crisis disrupts shipments and threatens supplies.
Global Prices
US crude rose 0.4% to $82.26 a barrel, with a session-low at $81.64, while Brent added 0.3% to $86.38 a barrel.
US crude rallied 1.45% on Monday, while Brent added 0.6%, the first profit in four days as global inventories fell.
Russian Supplies
Goldman Sachs said that Ukrainian drone attacks against Russian refineries disrupted 900 thousand bpd of production capacity.
The investment bank added that energy outages in the refineries could take weeks to fix, and there will be cases of permanent impairment.
The Red Sea Crisis
Goldman Sachs pointed to an accumulation of nearly 100 million barrels of oil in international waters due to the Red Sea tensions, as shipping companies redirect trade flows to avoid Houthis attacks.
Upward Pressures on Prices
Goldman Sachs said that Red Sea tensions, in addition to Russian supply disruptions, boosted oil prices by $4 so far.
US Inventories
Later today, the American Petroleum Institute will release initial data on US crude stocks, expected to show a drawdown for the third week in a row.
Dollar backs off five-week high as US treasury yields drop
The dollar fell in European trade on Tuesday against a basket of major rivals, extending losses for the second day away from five-week highs on profit-taking while US treasury yields declined as well.
The losses came after bearish remarks by Fed officials this week, which bolstered the case for a June interest rate cut.
The Index
The dollar index fell 0.2% today to 104.01, with a session-high at 104.24, after closing down 0.2% on Monday, the first loss in three days on profit-taking off five-week highs at 104.50.
US Treasury Yields
US 10-year treasury yields fell 0.6% on Tuesday, almost touching a two-week trough and pressuring the greenback.
The developments came after a batch of bearish data from several Fed officials, which were interpreted as in favor of an early US rate cut in June.
Fed Remarks
Fed Chicago President Austan Goolsbey said on Monday that at the Fed’s policy meeting last week, there were suggestions for three interest rate cuts this year.
However, the Fed will be cautious and will wait for more data before cutting rates.
US Rate Prospects
The odds of a 0.25% Fed interest rate cut in May stood at 8%, while the odds of such a cut in June stood at 70%.
Traders overall expect 75 basis points of interest rate cuts in 2024.
Now investors await important US personal spending data to get a better view of inflation and the likely path ahead for policies.
Gold targets $2200 as dollar loses ground
Gold prices rose in European trade on Tuesday on track for the second straight profit and heading towards $2200 as the dollar loses ground against major rivals.
The dollar is falling on bets the Fed will start cutting US interest rates at the June meeting.
Prices
Gold Prices rose 0.4% to $2180 an ounce, with a session-low at $2167, after rising 0.3% on Monday, the first profit in three days as the dollar stalls.
The Dollar
The dollar index fell 0.15% on Tuesday away from five-week highs at 104.50 against a basket of major rivals.
The dollar fell following bearish remarks by Fed officials, which bolstered the odds of a 0.25% US interest rate cut in June.
Fed Remarks
Fed Chicago President Austan Goolsbey said on Monday that at the Fed’s policy meeting last week, there were suggestions for three interest rate cuts this year.
However, the Fed will be cautious and will wait for more data before cutting rates.
US Rate Prospects
The odds of a 0.25% Fed interest rate cut in May stood at 8%, while the odds of such a cut in June stood at 70%.
Traders overall expect 75 basis points of interest rate cuts in 2024.
Now investors await important US personal spending data to get a better view of inflation and the likely path ahead for policies.
The SPDR
Gold holdings at the SPDR Gold Trust remained flat yesterday at 535.33 tonnes.
Yen climbs after warnings from Japanese finance minister
The Japanese yen rose in Asian trade on Tuesday against a basket of major rivals, resuming its recovery from four-month lows against the US dollar following warnings by Japan’s finance minister.
The increasing verbal interventions by Japanese authorities show their discontent with the yen’s steep decline against major rivals, approaching multi-decade lows.
JPY/USD
JPY/USD fell 0.15% to 151.21, with a session-high at 151.44, after closing up 0.15% on Friday away from four-month lows at 151.86.
Japan’s Finance Minister
Japan’s finance minister Shunichi Suzuki said on Tuesday the government could intervene to prevent further yen declines.
Also, Japan’s chief currency diplomat, Masato Kanda, said on Monday that authorities are monitoring the forex markets closely and will intervene if needed.
Why’s the Yen Declining after the Rate Hike?
The yen tumbled over 1% since the Bank of Japan raised interest rates last week, as the BOJ back then took a bearish stance on future policy moves.
Yen Outlook
The Commonwealth Bank’s forex analysts said that 152 will likely be a very strong resistance facing the JPY/USD pair as the Japanese government prepares for intervention.
They believe that traders are highly conscious of the Japanese government’s standby position to support the yen at such levels in the months to come.