ALL IS CALM IN THE CURRENCY WORLD AS OIL PRICES BOUNCE
Currency traders remained largely on the sidelines Thursday, as demand for commodities rose after a recent selloff.
The US dollar was little changed against the pound and euro through the European session, as the majors traded within a narrow range. The outlook on the dollar remains mixed in the wake of the Federal Reserve’s most recent decision to raise interest rates.
That’s because traders remain unconvinced about the health of the world’s largest economy. US gross domestic product (GDP) expanded a mere 1.2% annually in the first quarter. Inflation and retail sales have slowed in recent months, painting a grim picture of the economy.
Traders dissected a deluge of economic data on Thursday. In Europe, Switzerland’s trade surplus expanded faster than expected last month thanks to a large pickup in exports.
Meanwhile, France’s business climate declined slightly this month, confounding expectations for no change. The government’s business climate index dipped to 108 from 109.
The United Kingdom’s industrial trends survey surged this month, a sign that domestic producers were withstanding the Brexit shock. The CBI industrial trends index climbed to 16 in June from 9 the previous month. Analysts were expecting a decline to 7.
In commodities, oil prices staged a modest recovery after crashing to fresh 2017 lows. Oil remains vulnerable to bigger losses in the short term as traders evaluate Libya’s plans to raise output. With supply far outstripping demand, crude is widely expected to remain under pressure. Commodity traders are therefore keeping a close eye on Friday’s US rig count data courtesy of Baker Hughes Inc. The report is likely to show another rise in weekly oil rigs.
The euro held within a narrow range against its US counterpart at the start of North American trade. The EUR/USD was last seen trading at 1.1170. The pair has been in consolidation mode since falling from yearly highs above 1.1280. At the same time, a rebounding dollar pressured the common currency in the wake of last week’s Fed decision. The US dollar index was recently seen trading at more than one-month highs against a basket of world currencies.
A solid CBI industrial trends report had a minimal impact on the cable, which consolidated in the 1.2670 range through the European session. Brexit talks are expected to keep sterling on the defensive for the foreseeable future.
US crude prices returned to bear market territory this week on news that Libya had ramped up production. Prices appear to have already bottomed, although analysts warn of continued bearish pressure for the black commodity. Oil remains highly sensitive to supply data, including US rig counts. Another week of solid increases in US shale rigs could precipitate fresh losses next week.