WTI crude oil futures oscillated around $84 per barrel on Monday, approaching a multi-year high reached in October 2021, and the bull market in oil shows no signs of slowing down. Oil prices continue to rise amid concerns about possible crude shortages and falling inventories in the oil market, with investors ignoring a potential hit to fuel demand from the omicron option.
For the moment, oil prices also do not seem to be reacting to the arrangement between China and the US. China has agreed with the US to release oil from its strategic stockpiles around Lunar New Year, an attempt by major consumers to lower oil prices. The oil price may continue to be supported by a potential strong demand recovery in the future, although higher oil prices may also increase the risk of policy intervention. Strong gains over the past four weeks have put WTI crude oil futures close to reaching a 7-year high of $85.41 per barrel, reached last October 25.
Meanwhile, in the currency market, it seems that the strong uptrend on the GBP/USD pair may be coming to an end and a local correction may be in store. Today, the British pound fell below $1.37, coming off more than two-month highs at $1.37485, reached last week. Investors may have turned to the dollar on the assumption that the U.S. Federal Reserve will outline at its meeting later this month what the interest rate hike cycle may look like.
At the same time, investors are awaiting a number of economic releases due this week that could set the stage for a potential UK interest rate hike in February, including UK inflation data on Wednesday. So there could be a "race" here between the two central banks over the pace of hikes. Conversely, rising political uncertainty in the UK could hurt sterling as Prime Minister Boris Johnson has been called on to resign by some members of his party after he admitted he attended a party during the May 2020 lockdown.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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