US oil stocks tumble but USD is serene

A 5.9 million barrel drop in US oil inventories was double the expected loss, and it sent the price of crude oil to a one month high. That would generally weaken the USD, but it remained in a narrow range through Wednesday. Maybe it was offset by the solid rise in import and export prices in the US, 1.2% and 2.1%, respectively. That said, the EURUSD is still hovering just below $1.20, and the GBPUSD rate is only 20 basis points below the $1.38 spike we saw yesterday.

Many analysts believe we will see further USD weakness. That could start to come true today. Several US manufacturing and industrial production datasets are due out this afternoon, and the market forecasts are all over the shop. So, almost whatever the hard data delivers will create volatility later today. Yesterday brought us a swathe of US Federal Reserve speakers and the release of the Beige Book. The mood of all was twofold; interest rates and monetary policy will remain low and loose for now, and the recovery is moderate. Yep, beige is a good name for that book right now.

Strong Australian employment data boosts AUD

But I am getting ahead of myself. Overnight news included 70,700 new jobs being created in Australia and their unemployment rate coming down to 5.6%, the lowest since April 2020. Having been above A$1.8080 yesterday, the GBPAUD is down to A$1.7830 this morning and has been lower overnight. The increase in the oil price will also strengthen the Aussie Dollar due to their oil-exporting activity.

The Canadian Dollar also gains with the price of oil but is also influenced by the USD as the US is Canada’s largest export market. Canadian manufacturing sales figures will be released this afternoon. The GBPCAD rate is sitting around C$1.7240 right now but was as high as C$1.7325 yesterday. We expect the manufacturing sales figures to be a little weaker than last month, so there is room for the CAD to weaken today.

The Sterling – Euro exchange rate is looking sorry for itself this morning. €1.15 is providing support for the Pound, and that may well be the bottom of this range for now, but we lack significant data from either side of the Channel today. So range trading is the more likely outcome for now.

China’s GDP expected to boost Asia-Pacific currencies

Overnight tonight, we expect to see further recovery in China’s GDP growth and industrial production. That, if true, will strengthen the currencies of China’s suppliers in Asia and Australasia. Risk-averse buyers of currencies in the region may wish to act before the news. 

And on the Ukraine story, the US President and the German Chancellor have called for Russia to withdraw troops to ease tension. There is no sign their calls are being heeded. And the US is to impose fresh sanctions on Russia over the SolarWinds hacking allegations. If these stories escalate, the USD will strengthen, as will gold.

And cryptocurrencies are either the Emperor’s New Clothes or the future of money, dependent on your perspective. However, Coinbase, a cryptocurrency exchange, floated on the stock market yesterday, potentially adding a level of legitimacy to an industry that regulators really don’t like. The launch price was $430, and it ended the day at $328 a share.

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