Oil Prices Drop Over the Course of the Week  

 *Prices are as of the time of writing this report

The Nominal Effective Exchange Rate (NEER) of the Lebanese pound increased marginally this week against a basket of 21 influential currencies, including the US Dollar and Euro, and recorded 231.04 points on November 1^st, 2024. Since the start of the year, we notice that the NEER Index dropped by 4.09%. The decline is attributed to the US Dollar’s decrease this year, which led to a decline in the Lebanese Lira’s valuation against other currencies since the Lebanese Lira’s exchange rate to the US Dollar has been stable since January 2024.

International Forex Market

 *Prices are as of the time of writing this report

In international currency markets this week, the US Dollar index, a measure of the US currency’s strength against a basket of six rivals, decreased slightly by 0.11% to 104.14. This decrease is attributed to traders’ expectations of a moderate rate cut of 25 bps with a 98.3% possibility of rate cut in December meeting. These expectations are derived from robust labor market data, PCE inflation figures indicating relieving price pressures, and the US economy growth by 2.8%, being less than expected of 3% in Q3.  Despite this week’s decrease, it is set to end October with the best monthly gain in more than 2 years at around 3%. Lastly, the possibility of Donald Trump winning the presidential elections next week also weighed on the dollar.

The euro rose by 0.58% reaching 1.0856 this week after surprising strong growth figures as Euro zone economy grew by 0.4% QOQ in Q3 exceeding the forecasts of 0.2%, and increase in inflation in the Euro zone, thus lowering traders’ bets that the European Central Bank will not perform large reductions in interest rates and will continue gradual reductions. Main economies in Europe displayed better than expected growth as in France and Spain, as well as Germany that reported a growth of 0.2% after experiencing recession in Q2. Regarding inflation in Euro zone, it rose from 1.7% annually in September to 2% annually in October, higher than forecasts of 1.9%.

Regarding the British pound, it depreciated this week against the US dollar by 0.38% reaching 1.291 after the release of Labor Government’s first budget. The budget presented included a £ 40 billion of tax increase, the highest since 1993, increase of borrowing of £ 28 billion a year, and £ 297 billion to be raised from bond sales this fiscal year. These potential revenues will be used to increase public services funding in addition to cover the £ 22 billion fiscal hole inherited from the previous Conservative government.

Similarly, the Swiss franc depreciated by 0.3% reaching 0.8682 on November 1^st, 2024.

In Asian forex markets, Japanese yen depreciated marginally by 0.34% over the course of the week recording 152.82. The Yen started the week with a decline reaching 153.5 on Monday as the ruling coalition lost the majority in the parliament after the weekend elections as it was anticipated, causing economic and political uncertainty and confounding Bank of Japan’s normalization plans. Later on, the yen erased some of its losses after Bank of Japan’s decision to keep interest rate unchanged at 0.25%. Despite the latest gains, Yen will remain under pressure from the US dollar which is supported by signs of robust economy and expectations of former president Trump to win the upcoming US elections next week.

Similarly, Chinese Yuan depreciated by 0.05% to record 7.1235 on November 1^st, 2024 as the Chinese PMI data released on Thursday showed expansion in manufacturing activity for the first time since April and recording 50.1 in October compared to 49.8 in September. However, exports numbers are still unattractive as it is showing more declines in addition to an increase in unemployment. Traders are now awaiting the decisions form the National People’s Congress meeting held from the 4^th till the 8^th of November for possible fiscal support measures influencing the economy.

Commodities Market

 *Prices are as of the time of writing this report

In commodity markets, Gold prices are set to end the week with marginal gains as it reached $2,749.72/ounce on Friday after experiencing fluctuations over the course of the week. It recorded new high records on Wednesday as it surpassed the $2,790/ounce level after the release of Job Openings and Labor Turnover Survey (JOLTS) report showing a drop in US job openings to its lowest level since 2021, indicating less aggressive rate cuts by the Federal Reserve. In the meantime, markets were closely observing the escalating geopolitical tensions in the Middle East and Ukraine. Later on, the US Department of Labor revealed that initial jobless claims dropped unexpectedly from 228,000 to 216,000 for the period ending October 26^th, 2024, giving the Federal Reserve more room to avoid aggressive rate cuts. On Friday, gold prices increased to $2,749.72/ounce due to the political uncertainty days before the presidential elections as traders are considering purchase of gold as a hedge against higher inflation risks in case Trump wins the elections due to his expansionary fiscal policy and hikes in tariffs.

As for both oil benchmarks, Brent and West Texas Intermediate (WTI) prices dropped by 1.84% and 0.89% respectively recording $74.65/barrel and $71.14/barrel. Oil prices declined this week to reach $71.12/ barrel for Brent and $67.21/barrel for WTI on Tuesday as Israel’s retaliatory strikes avoided Iranian’s oil and nuclear facilities and targeted military facilities only. Later on, oil prices erased some of its losses after API data of a decrease in US crude inventories, reports that OPEC+ might delay December production increase for a at least a month, in addition to latest reports that Iran is preparing to launch an attack on Israel from Iraqi territories through drones and ballistic missiles.

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