Just a few years ago the mantra on crude oil prices was “lower for longer.” Irrational pessimism about the dynamic power of the U.S. economy as well as a misunderstanding about the potential and risks associated with shale oil production substantially impacted investment decisions.
We had this doom and gloom attitude that the U.S. days were behind us and our manufacturing in the United States was hopelessly lost forever.
“There are decades where nothing happens; and there are weeks where decades happen.”
With respect to the early 20th Century Soviet leader, pound traders no doubt feel like they’ve seen a decade’s worth of Brexit news crammed into just the first 24 hours of the trading week already!
Uncertainty is usually bad. But with regards to the resignation of David Davis, market participants think it may actually be a good thing as far as the pound is concerned. The Brexit secretary resigned after the UK Prime Minister Theresa May forced through a new “soft Brexit” strategy she intends to present to the cabinet at Chequers.
The Energy Report gave an early warning about the state of the crude market we are in now. We warned producers and users of oil, gas and diesel to hedge. Now there are reports of airlines reducing capacity and businesses that are struggling due to higher crude and product costs. The recent oil price strength was born in the price crash in 2015 as it forced companies to cut investment and incorrect assessments about shale oil and the outlook for demand.
The mixed-bag U.S. jobs report on Friday caused the dollar to weaken further, allowing the likes of the euro/U.S. dollar and the Aussie dollar/U.S. dollar currency pairs to push higher, while buck-denominated gold also got a boost. The U.S. dollar/Canadian dollar currency pair, meanwhile was hit with a double whammy as it not only fell on the back of the NFP report but the Canadian dollar also got a boost from the stronger Canadian employment figures.
After President Trump spoiled “traders’ Christmas” last month with a now-infamous tweet implying that the May jobs report would be strong, market participants were happy to get back to their “normal” tradition of overanalyzing and excessively dissecting the volatile monthly jobs report at the moment of its release today.