Global Demand Worries Trigger Steep Decline in Oil Prices

 

05/05/202328/04/2023%ChangeYTD
Euro / LP16,534.5016,470.000.39%930.04%
Euro / Dollar1.10231.09800.39%3.52%
NEER Index117.61117.98-0.31%-30.82%

 

Lebanese Forex Market

The Lebanese Pound (LBP) remained steady within the new official rate of USD/LBP 15,000 by May 05, 2023.

On the parallel market, the Lebanese national currency surprisingly appreciated this week with an average of 95,000 LBP/USD. The pair LBP/USD recorded a minimum of 94,500 LBP/USD and a maximum of 97,200 LBP/USD during the course of this week. The appreciation of Lebanese Lira against the dollar could be attributed to the continuous intervention of BDL in the parallel market through Sayrafa.

As for the Euro/LBP currency pair, the Euro slightly appreciated against the dollar-pegged LBP with the currency pair going from last week €/LBP 16,470 by April 28, 2023 to 16,534.50 by May 05, 2023. The Nominal Effective Exchange Rate (NEER) of the Lebanese pound went down slightly by 0.31% weekly to stand at 117.61 points on May 05, 2023.

International Forex Market

This week, the US dollar retreated against major currencies as the dollar index decreased by 0.70% on a weekly basis to 101.283 on May 05, 2023. During the week, the Federal Reserve has increased interest rates by a quarter points as it was broadly expected. Following the FOMC decision, Chair Powell stated that the conditions in the banking sector have improved since early March. However, he added that the banking sector crisis led to further tightening lending conditions for small businesses and households. Regarding the possibility of a potential recession, Powell acknowledged the likelihood of a mild recession based on the Fed’s staff forecast, but he believes it is more probable to avoid recession due to excess demand in the labor market.

The Euro appreciated against the dollar by 0.38% to $1.1026. During the week, the market received positive economic data as the unemployment rate was at 6.5% (vs. 6.6% expected), recording its lowest since March. Later on this week, the ECB has increased interest rates by 25bps, which left deposit rates at 3.25%, a level not seen since March. Although the pace of hikes has decreased, the announcement included hawkish statements. Firstly, the ECB intends to halt reinvestments under its Asset Purchase Program at the beginning of July. Secondly, President Lagarde warned that there are still high risks to the inflation outlook. Lastly, it was evident that additional rate hikes are expected, with Lagarde confirming that the ECB has no plans to halt its tightening monetary policy.

The British pound also surged against the US dollar by 1.21% to stand at $1.2607 by the week ending May 05, 2023. The market has received positive economic data this week, as the mortgages approvals for March reached a 5-month high of 52k (vs 46k expected). Furthermore, the final composite PMI for April was revised up from the flash reading to 54.9, and recorded its highest level in a year.

This week, the USD/JPY decreased by -1.21 % to reach 134.08 by May 05, 2023 Elsewhere, the Australian dollar appreciated by 2.22% on a weekly basis to stand at 0.6727 AUD/USD by May 05, 2023. In contrast, the Canadian dollar depreciated by 1.11% on a weekly basis to reach CAD 1.3506 for a US dollar.

Commodities

Gold markets bounced back this week amid a weaker dollar, with gold prices surging by 2.90% to $2,040/ounce. This increase in gold prices this week came after the Fed hinted a probable pause of interest rate hikes cycle.

Crude oil prices marked its worst weekly drop in nearly two month amid concerns of slowing US economic growth and slowing China demand. Accordingly, oils prices plunged this week by 11.05% to $69.34/barrel.

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