By Russell Glaser – Oil prices have been falling during today’s trading as a significantly stronger dollar has weighed on the market. During the Asian and European trading sessions, the commodity fell 1.3%, dropping to a low of $77.
The dollar is up against the euro by nearly 1%, trading at 1.4650 from 1.4783. The price of crude oil typically falls as the dollar gains in strength. European stocks were down more than 2% as a reorganization plan of the British banking system was announced. Assets that have been divested from some of Britain’s largest banks will be grouped together to form a separate banking entity. Traders were less than pleased with the government’s plan and bid down European equities.
Much of crude oil’s price movement may be attributed to the negative correlation to the dollar. There is also speculation that the price of crude is fundamentally overvalued. Oil refineries are continuing to cut production. Despite the excess slack created, oil and gas inventories have steadily risen.
Contrary to the negative fundamental data, strong manufacturing numbers were reported from the U.S. yesterday, along with positive economic news from Europe and China. Crude oil prices jumped with this news.
Tomorrow traders will be looking for two key market events; the release of the weekly crude oil inventory numbers and the FOMC rate statement. Keep an eye to the result of the change in gasoline stocks. The markets have been focusing on this data piece when evaluating the worthiness of this economic report. The accompanying Fed rate statement will proved significant volatility as the expected statement may include future U.S. interest rate policy, a key factor when valuing the dollar.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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