- The oil prices have climbed to near $77.50 as the Fed has ditched a bigger rate hike regime.
- US recession risk has not faded yet as the Fed has hiked its terminal rate projection to 5.1%.
- A solid build-up of oil inventories reported by the EIA has failed to weaken the black gold.
West Texas Intermediate (WTI), futures on NYMEX, have displayed a bullish three-session spell on hopes of a recovery in global economic prospects. The oil prices have climbed above $77.50, recovered dramatically after registering a fresh annual low at $70.61 last week, as the Federal Reserve (Fed) has ditched the bigger interest rate regime.
Termination of the 75 basis points (bps) interest rate hike spell by the Fed is the result of a slowdown in the United States Consumer Price Index (CPI), consecutively for two months. The headline US CPI that inculcates oil and food prices in calculation dropped to 7.1% from the prior release of 7.7%. This has trimmed the risk of recession in the US economy for a while but the recession risk has not faded yet as the Fed policymakers have advocated for a higher terminal rate at 5.1% by the end of CY2023.
Also, Fed chair Jerome Powell has promised to keep policy restrictive enough to achieve a 2% inflation rate. The US Dollar Index (DXY) is hovering around 103.62 after displaying wild gyrations. The US Dollar is expected to display weakness further as the Fed has approved a smaller and slower interest rate hike approach, which will eventually support oil prices.
The oil prices have not reacted much to the solid build-up of oil inventories reported by the official US agency. The US Energy Information Administration (EIA) has reported a build-up of oil stockpiles by 10.231M for the week ending December 09.
Meanwhile, investors are awaiting updates on the Keystone pipeline restart from Canada’s TC Energy Corp. Last week, the 622,000 barrel-per-day pipeline was shut after leaking oil into a creek in Kansas. Over that, the firm will provide an update ahead, as reported by Reuters.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds above 1.0650 after US data
EUR/USD retreats from session highs but manages to hold above 1.0650 in the early American session. Upbeat macroeconomic data releases from the US helps the US Dollar find a foothold and limits the pair's upside.
GBP/USD retreats toward 1.2450 on modest USD rebound
GBP/USD edges lower in the second half of the day and trades at around 1.2450. Better-than-expected Jobless Claims and Philadelphia Fed Manufacturing Index data from the US provides a support to the USD and forces the pair to stay on the back foot.
Gold is closely monitoring geopolitics
Gold trades in positive territory above $2,380 on Thursday. Although the benchmark 10-year US Treasury bond yield holds steady following upbeat US data, XAU/USD continues to stretch higher on growing fears over a deepening conflict in the Middle East.
Ripple faces significant correction as former SEC litigator says lawsuit could make it to Supreme Court
Ripple (XRP) price hovers below the key $0.50 level on Thursday after failing at another attempt to break and close above the resistance for the fourth day in a row.
Have we seen the extent of the Fed rate repricing?
Markets have been mostly consolidating recent moves into Thursday. We’ve seen some profit taking on Dollar longs and renewed demand for US equities into the dip. Whether or not this holds up is a completely different story.