Gold, Oil and the dollar All Up Post The Geopolitical Tension

Lebanese Forex Market

To-date, the Lebanese Pound (LBP) remained steady within the official range of USD/LBP 1,514 to 1,514.5, with a mid- price of USD/LBP 1,514.25 in the week of March 04, 2022.

On a different note, the Lebanese pound traded with a lower range on the parallel market during the first week of March, with average of 21,500LBP/USD.

Lebanon might be facing a shortage in wheat following the war in Ukraine, as it constitutes over 50% of Lebanon’s wheat imports. The available stocks will fulfill the needs for about a month and a half and as such Lebanon is in need for an alternative to Ukrainian wheat as declared by the Ministry of Economy. Moreover, the Ministry of Economy has recently formed the Food Security Committee, made up of representatives of concerned authorities such as mills and bakeries, considered an emergency committee to discuss alternatives for wheat supplies.

Moreover, this week London court ordered two Lebanese banks to pay the amount of $4 million of a depositor account locked in Lebanon’s crippled banking system by informal capital controls since 2019.

In turn, the dollarization ratio for private sector deposits decreased from 80.09% in October 2021 to 79.46% in December 2021.

As for the Euro/LBP currency pair, the Euro depreciated against the dollar-pegged LBP with the currency pair going from last week €/LBP 1,684.92 to €/LBP 1,651.30 by March 04, 2022. Moreover, the Nominal Effective Exchange Rate (NEER) of the Lebanese pound increased weekly by 2.26% to stand at 157.30 points on March 04, 2022.

International Forex Market

The Euro/USD depreciated against the dollar from last week from €/USD 1.1177 to €/USD 1.0954 by March 4^th, 2022.  This drop considered as the biggest weekly drop, falling below $1.10 for the first time since May 2020 as the War in Ukrainian intensifies this week.

Moreover, this week, US 10-year Treasury yield fell below 1.80%, Gold and the dollar rose. Oil hovered around $114 per barrel and bitcoin fell to $41,400.

Currencies are expected to become more volatile and to increase over the next three months in the wake of Russia’s invasion of Ukraine.

Moreover, the yen and Swiss franc are expected to weaken marginally against the greenback over the 12-month horizon as neither currency carries an interest rate edge.

And in the U.S. Federal Reserve is set to begin raising rates at its meeting this month from near-zero, delivering at least 125 basis points of tightening by year-end, according to a separate Reuters poll.

Commodities

Gold price increased by 2.24% at the end of this week to $1,948.36/ounce. Gold price rose on March 4 in the international market, scoring its best weekly gain since May 2021, as investors jumped for safe-haven assets after Russia attacked a nuclear power plant in Ukraine leading to Geopolitical tensions.

Crude oil prices jumped this week by 13.44% to $112.52/Barrel. In details, international crude oil prices rose above USD 110 a barrel for the first time since mid-2014 on fears that oil and gas supplies from Russia could be disturbed, either by the conflict in Ukraine or retaliatory western sanctions.