Risk aversion dominated today’s European session, helping gold prices advance by over $30 to rise above $1250.
The yen outperformed due to safe haven flows as equity markets tumbled in response to a further decline in oil prices today.
Oil prices extended Tuesday’s more-than 4% decline and this impacted market sentiment. Crude prices dropped below $31 a barrel today after falling on comments by Saudi Arabia’s oil minister Al Naimi yesterday. He ruled out any reduction in output any time soon. But prices rebounded back above $31 after the release of a weekly EIA report today.
Crude oil inventories rose more – than – expected as they showed a build for the second consecutive week. Gasoline inventories declined more – than expected. The data revealed a 2.236 million barrel decline in gasoline stocks versus a 850,000 contraction expected. Meanwhile, crude stockpiles rose to 3.50 million barrels in the week ending February 19. This beat the 3.33 million expected and was higher than the prior week’s 2.15 million barrels.
The dollar slid below 112 yen today, as US Treasury yields fell. Disappointing US data did not help the greenback. The Markit services PMI index declined to its lowest level since October 2013 to print a reading of 49.8 in February. Many analysts expected a reading of 53.5 from January’s 53.2. Meanwhile, US new home sales plunged in January at an annual rate of 494,000 units from 544,000 in December. It missed forecasts for a gain to 520,000 homes.
Sterling fell for a third consecutive day today and plunged below 1.39 against the dollar to lows not seen since 2009 as Brexit fears continue to weigh on the British currency. The pound is down over 3% this week so far. EURGBP rose to its highest since December 2014 to peak above 79 pence today.
The euro was being dragged down by Brexit fears against the dollar. Today’s losses have seen it fall back below $1.10 for the first time since February 3. But the single currency bounced back up above $1.10 with the help of safe haven demand. There were no data reports of note in the European session.
Three Fed officials were scheduled for speaking engag ements today. Richmond Fed President Jeff Lacker already spoke at 8 a.m ET. He said it remained logical to expect further interest rate increases by the Fed this year. However, Lacker is not a voter this year at the FOMC.
Next up is Dallas Fed President Rob Kaplan who is due to speak at 1:15 p.m. ET, followed by St. Louis Fed President James Bullard at 7 p.m. ET.
Bullard is a voting member so it would be interesting to hear what he says. Just recently on February 17 he spoke against further interest rate hikes. The dollar weakened after his comments that it would be unwise for the Fed to continue hiking interest rates given declining inflation expectations.
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