Oil plunges 4% as further interest rate hikes loom

2023-06-26
Summary:

The tech-heavy Nasdaq's robust gain got a boost from momentum stocks led by Amazon, Apple and Microsoft, while the S&P 500's advance was more modest.

The U.S. dollar and Treasury yields climbed on Thursday as Fed Chair Jerome Powell’s second day of testimony did not surprise.


The tech-heavy Nasdaq's robust gain got a boost from momentum stocks led by Amazon, Apple and Microsoft, while the S&P 500's advance was more modest.


Gold dropped nearly 1% to a three-month low with the possibility of more rate hikes overriding any support from signs of a softer labour market.


Oil futures fell about 4% as a bigger-than-expected BOE rate hike prompted worries about the economy and fuel demand that outweighed support from a surprise draw in U.S. oil supplies.


Commodities

U.S. jobless claims held steady at a 20-month high last week, potentially signalling a softening labour market.

XBRUSD

U.S. crude inventories fell by 3.8 million barrels in the last week to 463.3 million barrels, compared with analysts' expectations in a Reuters poll for a 300,000-barrel rise.


An executive at U.S. shale producer EOG Resources said oil prices could rise as muted increases in U.S. oil production and cuts by OPEC+ producers will limit supply in the months ahead.


Forex

The slew of rate hikes come a day after Powell told lawmakers on Capitol Hill further rate increases were "a pretty good guess" of where the central bank was heading if the economy continued in its current direction.


During the second day of testimony Powell said the central bank would move interest rates at a ‘careful pace’ from here. Asked about rate cuts, he said it would not happen any time soon.


Sterling ended lower in a choppy session after the BoE raised its main interest rate to 5% from 4.5%. The UK inflation held at 8.7% in May, the highest of any major economy.

Euro outruns sterling with BOE on tenterhooks

Euro outruns sterling with BOE on tenterhooks

The euro stayed flat after rising against the pound last week. UK and EU banks signaled their readiness to act amid easing price pressures.

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