Oil falls 2% as dollar gains on rate path uncertainty

2023-04-20
Summary:

Gold prices fell below the key $2,000 level as the dollar and Treasury yields regained footing on Wednesday. Oil slid about 2% to a two-week low despite a sharp decline in U.S. crude inventories.

Gold prices fell below the key $2,000 level as the dollar and Treasury yields regained footing on Wednesday. Oil slid about 2% to a two-week low despite a sharp decline in U.S. crude inventories.


Fed officials defended further rate hikes ahead in their speeches with few signals of potential easing by the end of this year expected by investors.


Market pricing indicated the chance the Fed will raise rates by one-quarter point in May edged up to 85%.


French shares’ bullish run continued. The DAX was testing its record high set in November 2021 and FTSE 100 traded around its record high seen earlier this year.


Gold plunged below $1970 in early trade but pared most losses to close at around $2000, leaving range-bound trading intact.


“Once gold breached that $2,000 mark, there were a lot of stop losses that were triggered,” Phillip Streible, chief market strategist at Blue Line Futures in Chicago.


U.S. crude oil and distillate inventories fell last week while gasoline inventories rose unexpectedly, the EIA said on Wednesday. WTI crude tumbled below $80 due to strengthening dollar and increasing seasonal demand concerns.


UK inflation rate surprises again with March figure holding above 10%. Deutsche Bank raised its expectation to two hikes and Morgan Stanley also saw higher chance of two hikes for the BOE.


The US economy stalled in recent weeks, with hiring and inflation slowing and access to credit narrowing, the Federal Reserve said in its Beige Book survey of regional business contacts.


Analysts are staying bearish on the dollar. "This is a temporary reprieve for the dollar," said Bipan Rai, North America head of FX strategy at CIBC Capital Markets in Toronto.


"We still think that over the medium- to long-term that the dollar is going to continue to come under considerable amounts of pressure. And that's tied to our view that the Fed is probably going to hike one more time and then that's it."

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