Oil prices rise as investors assess the Iran-Israel truce
Oil prices rose mildly on Wednesday as investors assess the Israel-Iran ceasefire, with prices boosted even further on data that showed strong US demand.
Brent futures rose 0.7% to $67.62 a barrel as of 10:30 GMT, while US West Texas rose 0.7% to $64.81.
Brent closed at June 10 lows on Tuesday, while US crude closed at June 5, wiping out all the gains made after Israel’s strike against Iran.
The strike sent oil prices to five-month highs before relinquishing all gains quickly as the crisis calmed down.
Otherwise, initial data from the American Petroleum Institute showed US crude stocks fell by 4.23 million barrels in the week ending June 20.
Prices are also boosted by the prospects of Fed rate cuts soon, which would bolster economic growth and fuel demand.
Futures indicate 60 basis points of likely rate cuts by the Fed by the end of the year.
Truce Developments
Initial US intelligence data showed that American strikes failed to completely destroy Iranian nuclear capabilities completely, and only delayed them for a few months.
On Tuesday, both Iran and Israel said their air war is over with Trump publicly criticizing both sides for truce violation.
Some analysts expect oil prices to range between $65 and $70 a barrel in upcoming days as traders await important US data this week to gather more clues about the future path of Fed interest rates.
US dollar loses momentum as risk appetite rebounds following Israel-Iran truce
The US dollar struggled to recoup its losses on Wednesday with investors heading for riskier assets following the Iran-Israel ceasefire.
Global stocks surged to record highs while oil prices plummeted as the two countries agreed to cease hostilities.
Such developments prompted investors to heavily sell off the dollar after a recent surge on haven demand during the war.
The euro dipped 0.1% today but was still near October 2021 highs at $1.1597, while Sterling settled at $1.3616, near January 2022 highs.
The Swiss franc spiked to $0.8051 near 10-? year highs, while the yen bucked the trend with a 0.37% drop against the greenback to 145.4.
As for the dollar index, it rose mildly to 98.1 against a basket of major rivals.
Powell
Fed Chair Jerome Powell testified ahead of Congress that the Federal Reserve isn’t in a hurry to cut interest rates.
Trump continued his attacks against Powell and said he hoped Congress would take “this stubborn and stupid person” into account, adding that America will pay the price of “his stupidity” for many years to come.
Trump said there’s no inflation in the US and the economy is doing great, and asked once more for interest rates to be down by two or three percentage points, which would save the government $800 billion a year.
US Rates
Following Powell’s testimony, the odds of a Fed 0.25% rate cut in July stod at 19%.
The odds of such a cut in September rose from 82% to 87%.
Gold tries to recover as dollar weakens
Gold prices rose in European trade on Wednesday for the first time in four days away from two-week lows as the dollar fell against a basket of major rivals.
Now traders await Fed Chair Jerome Powell’s second part of his testimony ahead of Congress later today.
The Price
Gold prices rose 0.4% today to $3337 an ounce, with a session-low at $3320.
Gold lost 1.3% on Tuesday, plumbing two-week lows at $3295 after the Iran-Israel ceasefire.
US Dollar
The dollar index fell 0.15% on Wednesday, extending losses for the third straight session against a basket of major rivals.
The dollar is hurt as haven demand plunges following the Iran-Israel ceasefire, and bearish remarks by Fed officials ahead of Congress.
Powell
Fed Chair Jerome Powell testified ahead of Congress that the Federal Reserve isn’t in a hurry to cut interest rates.
Trump continued his attacks against Powell and said he hoped Congress would take “this stubborn and stupid person” into account, adding that America will pay the price of “his stupidity” for many years to come.
Trump said there’s no inflation in the US and the economy is doing great, and asked once more for interest rates to be down by two or three percentage points, which would save the government $800 billion a year.
US Rates
Following Powell’s testimony, the odds of a Fed 0.25% rate cut in July stod at 19%.
The odds of such a cut in September rose from 82% to 87%.
SPDR
Gold holdings at the SPDR Gold Trust fell 1.72 tons yesterday to a total of 955.68 tons, away from September 2022 highs at 957.4 tons.
Euro hovers near four-year high amid positive sentiment
The euro rose in European trade on Wednesday against a basket of major rivals, extending gains for the fifth straight session against the dollar, and about to hit a four-year peak as the risk appetite rebounded as the Israel-Iran ceasefire holds.
The odds of an ECB interest rate cut in July dropped considerably as investors await more clues on the future path of monetary policies.
The Price
The EUR/USD price rose 0.2% to $1.1632, with a session-low at $1.1604.
The euro closed up 0.3% against the dollar on Tuesday, the fourth profit in a row, marking a four-year high at $1.1641 after the Israel-Iran ceasefire.
US Dollar
The dollar index fell over 0.15% on Wednesday, extending losses for the third straight loss against a basket of major rivals.
As the Israel-Iran ceasefire holds, the dollar fell after bearish remarks from Fed Chair Jerome Powell boosted the odds of upcoming rate cuts.
European Rates
ECB President Christine Lagarde hinted at the possible end of the current cycle of policy easing, which was in response to a combined shock such as the Covid 19 pandemic, the Ukrainian war, and the energy crisis.
According to a Reuters source, most ECB members now aim at holding interest rates unchanged in July, with the global markets now expecting just an additional 25 basis points of rate cuts by the end of the year.
The odds of a 0.25% ECB rate cut in July now stood below 30%, with traders awaiting more eurozone data and remarks by ECB officials to gather more clues.