Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
SAHAM
The situation in the Middle East continues to worsen and crude oil prices continue to rise. Although an Iranian strike on a US military base in Jordan caused only limited damage, the boldness of the attack has raised the stakes of the ongoing conflict. Over in the Red Sea meanwhile, Houthis rebels have seized the port city of Mocha, which lies just 80 km north of the Bab el-Mandeb Strait, with dangerous consequences for shipping in and out of the vital chokepoint. The Brent Crude benchmark soared to $109 per barrel on Thursday, as the escalation in hostilities became impossible to ignore. While difficult, crude oil flows out of the region had persisted up until this point, albeit to a reduced extent, but yesterday’s events will inevitably throttle exports to a greater degree. The WTI benchmark also underwent a strong move on Thursday, melting straight through the three-figure mark to reach $104 per barrel.
Higher oil prices mean higher inflation; higher inflation translates to a higher likelihood of central bank intervention. Next week is the big one in terms of interest rate decisions, with the Federal Reserve, Bank of England and Bank of Japan all chiming in with their respective decisions within a 48-hour period. As things stand, interest rate traders are pricing in a 70% chance of a rate hike on the USD next Wednesday, and markets are adjusting accordingly. The Dow Jones and S&P 500 both settled 0.6% lower yesterday, while the tech-heavy Nasdaq-100 tumbled over 1% over the prior daily close. Gold sank the better part of 2% over the course of the day, while silver crumbled 5.5%, as both precious metals hit multi-week lows. Cryptocurrencies had no sanctuary to offer, as Bitcoin fell around 1.4% to $77,000 per coin. Worth noting once again the relative strength of the fledgling asset class compared to the more established commodity markets. The US dollar gained marginally against the majors, although it too provided very little by way of safe haven.
American producer prices rose 0.4% in August, falling exactly in line with predictions. The lack of surprise prompted very little reaction, particularly given the more impactful CPI release scheduled for publication later today. The headline inflation figure is expected to remain steady at 3.4% year-over-year, while the core component is expected to fall slightly to 2.4%. Should the actual reading come in much higher, it will be the final nail in the coffin as far as the Fed is concerned, dooming markets to a 25-bps hike next week.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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