Geopolitics and Economics

Daily Analysis - 07/01/2018

Last week's oil price and the week ahead for the currencies

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Last week saw violent demonstrations in Iran and declining US crude inventories. This week ahead will reveal all important US retail data for the crucial December selling season. Both events provide vital trading opportunities in commodities and foreign exchange markets.

Last Week


Last week crude oil prices continued their inexorable rise and remain well above the psychologically important $60 per barrel mark. Markets are fixated with round number price points and watch them carefully for signs of strength and weakness. Inventory levels in the US fell by 2.5 million barrels more than expected and this helped push prices up. The continuing demonstrations of discontent in Iran played a role too. Watch the developments by the regime in Iran to accommodate these disturbances and their suppression as well because, like in all international affairs, they create wider ripple effects. The declaration by the US administration in its changing policy in the Middle East strengthens the alliance between the US and the Saudi regime and is impacting the region. All of these developments affect the price of crude. The US is shaking things up in this volatile region with the purpose of effecting change. Keep your eyes on developments here as they produce significant trading opportunities for all of us.

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This Week


Speculation about the retail season in the US has been running positively since the close of the year. Remember that the US economy is highly retail dependent. About 72 percent of GDP is generated by retail and of that enormous number around 70 per cent of it takes place in the holiday selling cycle. This week’s retail data, due to report out Wednesday, will be crucial for the relative strength of the US dollar. The dollar has seen a large weakening across the board in recent weeks and this report, assuming a confirmation of what has widely been reported as a very good selling season will surely put the brakes on this weakening of the dollar. As the dollar strengthens the prices of commodities, like crude oil, that are priced in dollars falls. EURUSD, currently at 1.20 could well fall back to 1.19, representing an 8.3 % strengthening of the dollar against the Euro. This is likely to have similar effects on the other major currencies and presents us with an excellent trading opportunity. Keep yourself tuned to the release on Friday 13:30 GMT for the report and have your accounts funded to take advantage of the resulting movements in exchange rates.

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