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Euro brought under control and dollar rebounds

Published Tuesday, May 26th, 2015

Last week was a tale of two banks and diverging monetary policies. The ECB re-confirmed its commitment to fulfil its QE programme and even speed it up going into the summer whilst Janet Yellen said on Friday that it “will be appropriate at some point this year to take the initial step to raise the federal funds rate”. The chairwoman of the Federal Reserve considers the US “well positioned” for continued growth and believes that the 1Q growth slowdown was due largely to transitory factors and some “statistical noise”. Yellen warned that lags in the impact of monetary policy changes meant that the Fed could not afford to wait for its employment and inflation objectives to be met before acting. 

News that the US core consumer index had risen 0.3% for the biggest monthly increase since January 2013, putting the annual core inflation rate at 1.8%, took the shine off US equities and added to dollar strength that was a feature of all of last week. Brent lost $1.17 bbl on Friday to close at $65.37 bbl and WTI lost $1.00 bbl closing at $59.72 bbl. Over the week Brent lost $1.44 bbl and WTI 82 cts/bbl. July/August Brent closed the week at -56 cts/bbl and July/August WTI at -43 cts/bbl. Flat price might have lost more had it not been for increased tensions in the Middle East with ISIS taking both Ramadi in Iraq and Palmyra in Syria. 

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Posted by David Hufton