A rough couple of days
Oil is slightly higher on Thursday, paring losses from the last couple of days. Prices fell almost 10% over the last couple of days as China’s efforts to rapidly transition away from its zero-Covid campaign led to a powerful surge in cases, threatening to disrupt activity in the opening months of the year.
While most would agree that the move should lead to higher, more sustainable growth later in the year, the near-term outlook is clouded by the transition. With oil now dipping back to levels at which the US has hinted it will be a buyer in order to refill the SPR, it will be interesting to see whether support arrives or WTI is able to slip below $70.
Gold is giving back some of its new year gains on Thursday, with traders no doubt having one eye on tomorrow’s jobs report. The Fed minutes contained no surprises, with policymakers keen to stress their commitment to raising rates and driving down inflation.
Whether they’ll follow through is another thing and there is a growing divide between what the Fed is saying and what markets are pricing which in part explains why the central bank continues to be so forceful. It doesn’t want to contribute to a loosening of financial conditions, even at the expense of its communication effectiveness it seems. The decline we’ve seen in yields in recent days highlights this and has been supportive of gold. Another strong jobs report tomorrow may quickly put an end to that.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
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