For some time now, the US has been pushing for the release of strategic oil reserves in order to reduce pump prices and thus inflation. The release of reserves has taken place, but apparently, it was too small in terms of the increase in supply in relation to market expectations and eventually oil has become more expensive.
WTI crude oil futures were hovering around $78.5 a barrel on Wednesday, after rising more than 2 percent in defiance of a U.S.-coordinated move to release oil stocks from strategic reserves. The U.S. has announced the release of 50 million barrels, India is expected to release 5 million barrels and the U.K. may release the equivalent of 1.5 million barrels. Japan also confirmed on Wednesday that it would release some oil reserves allowed by Japanese law, with the Nikkei reporting the release of 4.2 million barrels out of about 490 million domestic stocks. Meanwhile, analysts suggest that the coordinated stockpile release has already been priced in, with Goldman Sachs saying that the estimated 70-80 million barrels of additional supply is less than the more than 100 million barrels that markets had expected. Additionally, OPEC has threatened that it may cut production as a result and ultimately the inventory release will be for naught.
New Zealand interest rates - up. NZD - down
The Reserve Bank of New Zealand raised the official interest rate (OCR) by 25 basis points to 0.75 percent at its last meeting this year. The decision was the second consecutive rate hike by the central bank, amid rising inflationary pressures and the loosening of COVID-19 restrictions. The board mentioned that further monetary tightening is expected over time, given the medium-term outlook for inflation and employment. Inflation is expected to exceed 5 percent over the next three quarters, peaking at 5.7 percent in Q1, due to higher oil prices, rising transportation costs and supply shortages. In Q3, CPI inflation rose 4.9 percent y/y, well above the central bank's target of 1 to 3 percent. The central bank has signaled that the interest rate will reach 2.6 percent by the end of 2023 and will be higher by December 2024.
Gold price with strong sell-off
Gold held below the $1,800 per ounce level on Wednesday, falling about 5 percent from its recent peak, as the reappointment of Federal Reserve Chairman Jerome Powell could push the dollar and bond yields higher. The news potentially bolstered expectations for further monetary tightening as the outlook for U.S. interest rates became increasingly hawkish, with at least three Fed officials openly discussing a faster pace of tapering the quantitative easing program. Gold previously appeared to gain as investors were able to hedge against inflation risks and sought safe-haven assets amid uncertainty about the economic and political outlook. But higher interest rates could raise the opportunity cost of the metal, which carries zero interest, potentially making it less attractive.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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