Brent: Inflation expectations rise on price rebound – Deutsche Bank
Jim Reid’s team at Deutsche Bank reports that Brent Oil prices rebounded by 1.2% after two days of declines, even without a clear headline driver. This move fed into higher inflation expectations, with 1‑year Euro inflation swaps rising to 3.02%.
Jim Reid's team at Deutsche Bank observed that Brent Oil prices rebounded by 1.2% after two days of declines, despite a lack of a clear headline driver. This increase contributed to higher inflation expectations, with 1-year Euro inflation swaps rising to 3.02%. However, overnight, Brent fell around a percent, bringing prices back to a similar level as the previous day.
The Middle East saw another rise in oil prices after two consecutive declines, but no obvious headline was driving the moves. This back-and-forth movement impacted inflation pricing, with 10-year US yields slightly dropping after the holiday. Meanwhile, the Australian Dollar (AUD/USD) remained defensive, hitting an eight-month low amid expectations of a steeper Fed rate hike in December.
Geopolitical concerns also favored the safe-haven US Dollar, while the Reserve Bank of Australia's cautious stance hampered the Aussie. In contrast, USD/JPY retreated slightly from its two-month high as recent gains to the 160.00 psychological mark raised concerns about potential Japanese FX intervention. Data revealed that Japan's wholesale inflation rose again in October, supporting the case for a BoJ hike in December and pushing the Yen higher.
However, a strong US Dollar, driven by the likelihood of a substantial Federal Reserve rate hike in December, might limit the Yen's upside. Gold continued its downward trend for the third consecutive day, slipping to $3,950, its lowest level in over a week. This decline was fueled by robust US Dollar buying amid rising Federal Reserve rate-hike expectations, which were reinforced by strong US consumer inflation figures.
Additionally, geopolitical uncertainties in the Middle East further supported the safe-haven Dollar, putting downward pressure on the commodity. The MSCI also removed Bitcoin treasury company from its global indexes, raising concerns about potential selling pressure on MSTR shares and future Bitcoin purchases. The US Dollar Index (DXY) reached an 18-month high, with most of its gains since August stemming from the Euro's decline.
Against a basket of trading partners, the Dollar gained half as much, and the Federal Reserve had raised rates once this year.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
