​Oil hits near three-month high with central banks in focus

2023-07-25
Summary:

Global equity markets and Treasury yields rose on Monday as investors braced for interest rate decisions from key central banks as well as corporate earnings that may shed light on the state of the economy.

Global equity markets and Treasury yields rose on Monday as investors braced for interest rate decisions from key central banks as well as corporate earnings that may shed light on the state of the economy.


The Fed will raise rates by 25bps this week to wrap up its tightening cycle, according to CME Group data. The ECB is expected to maintain a hawkish stance.


Oil prices rose by more than 2% to a near three-month high buoyed by tightening supply, rising U.S. gasoline demand, hopes for Chinese stimulus measures and technical buying.


Commodities

Gold priced in euros hit its highest since July 5 earlier in the day. The 200-day Moving Average had been a key point of technical resistance for both oil benchmarks since August 2022.


Oil's rise has reflected ‘tightening conditions as Saudi oil output cuts impact the market ... even as summer demand has been somewhat stronger for gasoline and jet fuel,’ Citi Research said in a note.


However, the global economic outlook remains mixed. In the U.S., business activity slowed to a five-month low in July, dragged down by decelerating service-sector growth, but the data was better than similar surveys out of Europe.


In the euro zone, business activity shrank much more than expected in as demand in the bloc's dominant services industry declined while factory output fell at the fastest pace since COVID-19 first took hold, a survey showed.


Forex

The BOJ is the most likely of the three central banks to throw up a market-moving surprise, traders say, with a tweak to its yield curve control policy seen as a possibility.


Last Friday the Japanese currency dived to as weak as 141.92 per dollar, also sliding on crosses, following a Reuters report that the BOJ was leaning towards keeping its yield curve control policy unchanged, though volatility gauges have spiked as the meeting looms.

USDJPY

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