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Oil under pressure

Published Wednesday, May 27th, 2015

The dollar index rose 1.3% yesterday following last week’s 3.2% gain. As a result commodities shed value led by oil which ended the day $1.80 bbl lower on Brent (63.72) and -$1.69 bbl on WTI (58.03). A stronger dollar is bad news for the US stock market as is the prospect of an interest rate rise so the trading week began with a 1% fall in US stock markets.

A stronger dollar impacts on exports and better-than-expected figures on US single-family house sales and consumer confidence from the Conference Board impacts on interest rate expectations. At the other end of the currency seesaw the euro continued to react to the Spanish election results and the Greek drama. The euro traded below $1.09 for the first time since the end of April. Yen weakness was even more apparent falling to Y123.12, a level not seen since July 2007. Nothing can stop the Chinese equity boom, no matter how overvalued it looks. The Shanghai Composite gained 2% and the Hong Kong 0.92%.

Yanis Varoufakis is confident there “will” be a deal on Greece. His confidence is disarming and could just as easily turn into a deal ‘should have been’ done. His body language is that Greece cannot and will not do anymore, it is up to the political masters of the eurozone to decide whether to pull the rug. Payments of around €300 million each are due on June 5, 12, 16 and 19. They could be paid as separate instalments or as one lump sum on June 19 which buys more time so that once again the ‘default deadline’ could be deferred.

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Posted by David Hufton