Economic Concerns Pushed Oil Prices on the Decline for a Fourth Consecutive Week

Lebanese Forex Market

The Lebanese Pound (LBP) remained steady within the new official rate of USD/LBP 15,000 by November 17, 2023.

The Lebanese exchange rate has showed stability over the past month, hovering consistently around 89,700 USD/LBP. This follows a prolonged period of depreciation that began in 2019, marking a notable departure from the previous trend. The current steadiness could be attributed to the halt of the Sayrafa platform as the ending of BDL’ intervention unto the market has cut opportunities for speculation, potentially allowing the Lebanese currency to find a more realistic value in the parallel market. Despite this relief, the outlook remains precarious due to persistent uncertainty surrounding Lebanon’s future and the broader regional context.

As for the Euro/LBP currency pair, the Euro appreciated against the dollar-pegged LBP with the currency pair going from last week €/LBP 16,012.50 to €/LBP 16,251 by November 17, 2023. The Nominal Effective Exchange Rate (NEER) of the Lebanese pound slightly decreased by 0.10% standing at 239.89 points on November 17, 2023.

International Forex Market

The USD Index (DXY) is hovering within a tight range near 104.475 by the end of the week on Friday 17 of November 2023 after a significant drop to multi-week lows on Tuesday. The index appears to be consolidating around the 104.00 mark despite a modest increase in US yields and mounting speculation about potential interest rate cuts by the Federal Reserve in the first half of 2024 as the dollar’s movement remains monotonous. In fact, the unexpected easing of inflationary pressures in the United States almost eliminates the likelihood of a further increase in key interest rates. However, a clearer assessment of the duration at which these rates will persist requires additional confirmations from macroeconomic data.

Meanwhile, across the Atlantic, the Eurozone edges closer to recession, and the trajectory of the economy remains a significant factor hindering the European currency’s attempt to sustain a robust upward trend. In more details, the euro is experiencing a modest correction following its second attempt to surpass the 1.09 levels yesterday. Despite Tuesday’s robust surge driven by US inflation announcements over the past three days, the euro has fluctuated within the 1.0840 range. The recent US weekly jobless claims announcement, revealing a noteworthy increase, shortly cast doubt on the strength of the US labor sector. Consequently, the European currency swiftly approached the 1.09 level again, yet it struggled to break through.

Regarding the UK, the British pound is poised for its third consecutive day of losses but ended the week at higher levels compared to previous week as it trades at approximately at 1.2394.

For other currencies in Europe, the USD/CHF edged lower by 1.60% by the end of this week to stand at USD/CHF 0.8884 despite the growing geopolitical tension in the Middle East, which would usually benefit the safe haven currency especially the Swiss Franc. Additionally, the Chinese and Japanese currencies appreciated respectively by 0.67% and 0.89% to stand at USD/CNY 7.2428 and USD/JPY 150.01 on Friday November 17, 2023.

Elsewhere, the Australian appreciated by 1.79% from the previous week to stand at 0.6474 AUD/USD on Friday November 17, 2023. Meanwhile, the USD/CAD pair decreased by 0.38% to stand at USD/CAD 1.3752, by Friday November 17, 2023 driven by a slight increase in oil prices which contributed to the appreciation of the Canadian dollar.

Commodities

Gold is consolidating its weekly gains above $1,980, reaching $1,986.1 on Friday and breaking a two-week losing streak. The rise in Gold prices is supported by declining US Treasury bond yields. Soft US economic data releases, including a significant drop in the Producer Price Index (PPI) and a 3.2% year-on-year decrease in the Consumer Price Index (CPI), contribute to expectations of a Federal Reserve pause and justify the increase in the non-interest-bearing Gold price. Additionally, retail sales fell 0.1% in October, and Thursday saw a 13,000 rise in US Initial claims to 231,000 for the week ending November 11, 2023.

Crude oil prices are on track for their fourth consecutive week of decline, having dropped around 5% by Friday November 17, 2023 to reach their lowest point in four months. The recent downturn can be attributed to disappointing economic data from both the United States and China, as reported by Reuters. Both Brent and WTI have now fallen to levels not seen since July. In the meantime, the U.S. Energy Information Administration disclosed an increase in crude oil inventories for the week ending November 10. This contributed to the prevailing bearish sentiment, notably following a substantial build of nearly 14 million barrels two weeks prior.