Don’t waste your time – keep track of how NFP affects the US dollar!

Data Collection Notice

We maintain a record of your data to run this website. By clicking the button, you agree to our Privacy Policy.

facebook logo with graphic

Join Us on Facebook

Stay on top of company updates, trading news, and so much more!

Thanks, I already follow your page!
forex book graphic

Beginner Forex Book

Your ultimate guide through the world of trading.

Get Forex Book

Check Your Inbox!

In our email, you will find the Forex 101 book. Just tap the button to get it!

FBS Mobile Personal Area

market's logo FREE - On the App Store

Get

Risk warning: ᏟᖴᎠs are complex instruments and come with a high risk of losing money rapidly due to leverage.

76.5% of retail investor accounts lose money when trading ᏟᖴᎠs with this provider.

You should consider whether you understand how ᏟᖴᎠs work and whether you can afford to take the high risk of losing your money.

Oil near $130 is a nightmare for inflation

Oil near $130 is a nightmare for inflation

Information is not investment advice

Oil markets were under great pressure amid increased demand and falling supply. OPEC+ is unable or unwilling to achieve its self-imposed production targets and insists on limiting production increases by 400,000 barrels per day despite rising prices. In addition, US producers are unable or unwilling to increase US oil supplies.

Inflation is a number one concern for the markets and everyone has a right to fear. Inflation in the US has jumped to a 40-year high of 7.5%. Inflation in the Eurozone hit an all-time high at 5.8%. It is not much different in the UK, where inflation has reached 5.5%, the highest level in 30 years.

The war between Russia and Ukraine has only made matters worse.  If Russian oil and gas supplies are interrupted due to sanctions or by order of the Kremlin to respond to the sanctions, this could drive prices crazy, even before we see an actual impact on demand from the disappearance of Russian oil from the market.

Crude oil soars towards $130 a barrel

Although the sanctions imposed by the West so far do not target Russian energy exports, after the Russian invasion of Ukraine, Russian shipments became toxic for most traders, insurance companies, and tanker owners. Some refiners and traders are concerned about how financial transactions will work after Russian banks are excluded from the SWIFT system. Others are running away to avoid harming their reputation.

To what extent may oil prices rise?

JPMorgan thinks that 66% of Russian oil will struggle to find buyers and expects crude oil prices to reach $185 by the end of the year if Russian oil remains without a buyer. If the Russian energy sector comes under sanctions, or if Germany moves to halt Nord Stream 2 gas pipeline, and if the US fails to reach a nuclear deal with Iran, all of these factors could curb global oil supplies. Together, they will push prices up even more.

What does oil above $125 mean for inflation?

If energy prices go up, inflation will be the first to be affected. This will have fatal consequences for Russia, but it will also increase cost-of-living pressures in the West.

Even before oil prices rose above $110 a barrel, analysts lowered growth forecasts and raised inflation estimates. If Russian energy sector is included in the list of targets, this will mean oil and gas will be more expensive for longer. In the scenario of the oil reaching $150 and remaining above $100 until early 2023, the pressure on consumers will increase. The economy and businesses will also be hit hard, with higher energy costs and lower demand hurting profits. This will increase the risk of turning the economic slowdown into a recession with growing inflation globally.

XBRUSDWeekly.png

The US inflation to where?

It is still unknown how the US economy will respond to the oil shock that has sent crude oil prices above $125 a barrel.

The US economy can withstand six months of oil prices at an average of $100, although it may deepen the inflation problem. However, it is almost certain that if oil remains around $125, it will lead to a halt in growth and higher unemployment rates, which could turn into a recession. Another question is how central banks will respond to rising oil prices. Federal Reserve Chairman Jerome Powell said events in Ukraine would not stop the US central bank's plans to start raising interest rates. What is not yet clear is the extent and the speed of rate hikes.

Finally, the economic impact of the invasion of Ukraine will come in the form of slowing US economic growth with higher inflation, while the European economy may enter a recession. Russia will plunge into a deep double-digit recession.

UsDollarDaily.png

The US dollar index rose to 99.00. For now, the greenback enjoys safe haven demand. Support is at 97.50. 

LOG IN

Similar

Earnings Season Forecast is Surprising

The second earnings season of 2022 has almost begun. From banks and tech stocks to cars and the retail sector: in this outlook, we covered the most promising releases of this summer and made several projections on the companies’ prospects.

Popular

Gold isn't saving investors from inflation

Many investors treated gold as a protection against inflation. However, last week, gold lost its major support and dropped despite rising inflation. Why did it act like this?

Choose your payment system

Feel the Team Spirit

Callback

Please fill in the form below so we can contact you

Select the best time for us to call you. We give calls from Monday to Friday in suggested intervals. In case we couldn't get through, we will try again at the same time the next day. For getting real-time assistance, use FBS chat.

We provide only English-speaking callbacks. If you prefer any other languages, contact the support team.

We will call you at the time interval that you chose

Change number

Your request is accepted.

We will call you at the time interval that you chose

Next callback request for this phone number will be available in 00:30:00

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later