Oil price is driving FX markets - SocGen
Kit Juckes, Research Analyst at Societe Generale, suggests that the (falling) price of oil is driving FX (and most other) markets as brent has now corrected almost exactly 38.2% of the bounce from the low early last year (just above $26/bbl) to this year’s peak of $56.5.
Key Quotes
“The challenge is well understood - OPEC-led output restraint and the current price levels have not been sufficient to reduce global oil supply enough to make a dent into inventory levels. That’s mostly an issue of lags, and our commodity team expects Brent to end the year at USD 60/bbl, but still, the FX market will be watching the spot price of oil today and the USD/RUB rate, testing the 200-day moving average which is just below 60.”
“The dollar’s trade-weighted value hasn’t correlated as well with oil prices in the last 9 months as it did in the past. Politics has trumped other issues. However, the dollar is likely to get a lift if we do break though the current levels, dragging USD/CAD higher. It should get some support against the rest of the G10 currencies too, but I don’t think this move is likely to go very far.”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
