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12 Dec 2014
Dollar consolidates as Oil slide continues – BBH
FXStreet (Barcelona) - The Brown Brothers Harriman Team, notes that the decline in oil prices has not only proven to be a setback for the dollar, but spurred losses in equities and pushed down bond yields as well.
Key Quotes
“Markets are reacting to the cuts in demand forecasts by OPEC and IEA. Oil prices have fallen about 10% this week. Brent finished last week near $69.10 and now is quoted around $63.25. WTI finished last week just below $66 and now is just above $59. This was driven by slowing of the Chinese economy coupled with increased output in the US (which reached a new high of 9.12 mln barrels a day in the week of December 5), and larger OPEC discounts.”
“This precipitous decline in oil prices hits the global economy as deflationary forces still threaten large parts of the world economy. It has knocked down US 10-year yields. After the constructive employment report, US 10-year yields finished last week near 2.30%. Today they touched 2.11%. And this despite continued robust data (see yesterday's 0.7% rise in headline retail sales) and speculation that next week's FOMC statement will delete or dilute the reference to "considerable period" as the next step towards preparing investors for a rate hike next year.”
“The decline in oil prices not only pushed down bond yields, but spurred sharp losses in the equity markets and a setback in the US dollar. The yen is the strongest currency this week, recovering a little more than 2.5%. The New Zealand dollar is in second place, helped by a less dovish central bank. The euro is about 1.2% higher on the week after recording new cyclical lows on Monday. Sterling rose about 0.75% this week.”
Key Quotes
“Markets are reacting to the cuts in demand forecasts by OPEC and IEA. Oil prices have fallen about 10% this week. Brent finished last week near $69.10 and now is quoted around $63.25. WTI finished last week just below $66 and now is just above $59. This was driven by slowing of the Chinese economy coupled with increased output in the US (which reached a new high of 9.12 mln barrels a day in the week of December 5), and larger OPEC discounts.”
“This precipitous decline in oil prices hits the global economy as deflationary forces still threaten large parts of the world economy. It has knocked down US 10-year yields. After the constructive employment report, US 10-year yields finished last week near 2.30%. Today they touched 2.11%. And this despite continued robust data (see yesterday's 0.7% rise in headline retail sales) and speculation that next week's FOMC statement will delete or dilute the reference to "considerable period" as the next step towards preparing investors for a rate hike next year.”
“The decline in oil prices not only pushed down bond yields, but spurred sharp losses in the equity markets and a setback in the US dollar. The yen is the strongest currency this week, recovering a little more than 2.5%. The New Zealand dollar is in second place, helped by a less dovish central bank. The euro is about 1.2% higher on the week after recording new cyclical lows on Monday. Sterling rose about 0.75% this week.”