The Oil markets
While OPEC calculates losses from extending the Oil pact, the market has to keep itself feet staging reliefs rally time to time. This week, the upbeat sentiments were kept by the news of supply disruptions from Iraq, but Friday slump showed that the market is not yet ready to consolidate the results.
The displacement of Kurdish separatists from Kirkuk deposits by Iraqi forces was a growth catalyst for the markets because of the supply outages. However, by the end of the week, Iraqi engineers reported that the output will be quickly restored in the near future, adding back 275,000 barrels to global production. The WTI retreated to $50 zone, Brent futures gave up on pressuring the bears around the $60 per barrel mark.
Government data in the United States indicated gasoline supplies growth for the fourth consecutive month, while distillates rose for the first time since August. The refineries continue to take advantage of the gasoline shortage, what somewhat eased the pressure on WTI. The lack of refinery capacity utilization (84.5% according to the latest EIA report) is also a bullish signal for the market. Crude oil inventories, in turn, declined for the fourth week in a row due to increased processing volumes.
The US Dollar
The Dollar keeps moving back and forth through maintaining the buoyant mood. The latest spurt can be attributed to the positive news from US Senate, where the Republicans managed to agree on the budget resolution. Winning with a minimal margin of 51 to 49, Republicans have an open path for an increase in the budget burden because of the planned Trump reform. The bill can be passed without Democrats, who called the reform a fertile soil for an even greater social stratification of American society. From the macroeconomic summary, applications for unemployment benefits have fallen to the lowest level since 1973, indicating the best in decades employment dynamics in the US. Frictional unemployment, which has increased in the affected states after natural disasters, is rapidly declining, as employees are returning back to work.
Euro and Pound
The Catalan crisis continues to put pressure on the European currency, while Draghi’s lack confident rhetorics about the curtailment of the program, which makes investors reconsider their bets on the long-term growth of the Euro. Core inflation in September was only 1.3% and a 0.7% gap to the target level will dictate the slowest possible reduction in the money supply. The EURUSD pair will likely be characterized by a wander in the range of 1.17-1.1850 next week.
Weak retail sales in the UK (-0.8% with a forecast of -0.4%) questioned the need to raise the interest rate of the Bank of England, which forced Pound to end the week in the red zone. However, it is obvious that the delay in raising the rate has previously put consumer spending at risk, so the Bank of England will choose the lesser of two evils in November and the rate hike will still take place.
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