The upward trend in oil prices was interrupted this week by the Russian President's statement that his country would begin to stabilize the energy market and help resolve the crisis. However, it now appears that after a one-time pullback, the price of oil seems to be returning to growth.
Just this week, the price of a barrel of WTI crude oil rose by more than 4.5 percent, reaching its highest level in 7 years, close to $80. Now, however, it seems that this week will also be favorable for oil, as it rose by more than 1 percent on Friday morning, exceeding the level of USD 79. All this even despite the latest news that the United States has plans to tap domestic crude reserves to help dampen the rise in pump prices. Earlier in the week, OPEC confirmed an increase in production limits by 400,000 barrels per day, which doesn't seem to be enough given current demand for energy commodities.
Gold resists rising yields
Yesterday, US 10-year bond yields rose to their highest level in 4 months at 1.57% on a wave of expectations for a November tapering by the US Federal Reserve. It seems that high expectations for a turn towards a rapid normalization of monetary policy could push gold prices lower. However, this is not currently the case, and the price of gold seems to remain in the region of USD 1750 per ounce. Thus, the market may still fear further increase in inflation, but it is also beginning to fear stagflation, which theoretically may be a factor supporting the price of the yellow metal.
The situation may be similar on the silver market, which in turn remains in the area of USD 22 and thus is still trying to defend the support resulting from the lower limit of the consolidation, which seems to have lasted on this market for over a year. It seems that more capital could turn to precious metals only after the trend moves in other markets, including energy commodities, have ended.
Dollar exchange rate waits for NFP
For the currency market the most important event of the day may be the publication of data from the US labor market. The popular NFP data will show the pace of growth of new jobs in non-farm sectors in the US. The market consensus anticipates an increase of 470 thousand jobs in September, with hourly wages rising by 4.6 percent on an annualized basis. It seems that it is the wage data that will be even more important, as it may answer the question of whether a cost-wage spiral has emerged in the US.
The EUR/USD pair is trading in the region of 1.1540 this morning and is near its lowest level since July 2021. Pressure on the strong Dollar seems to be coming from rising yields and the chances of avoiding a US bankruptcy, as the Senate approved a bill on Thursday to help Washington avoid a debt default in the near term. The bill will now go to the House of Representatives, where Nancy Pelosi is expected to take it up in the coming days. The bill will help ensure U.S. funding through early December.
Daniel Kostecki, Conotoxia Ltd.
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