Oil & Gold Prices Drop Over the Course of the Week As Geopolitical Tensions Eased in the Middle East

 *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 233.09 points on November 29^th, 2024. Since the start of the year, we notice that the NEER Index dropped by 3.23%. 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 by 1.5% to 105.936 marking the first weekly decline since 9 weeks. This decrease is attributed to the nomination of the hedge fund manager Scott Bessent as US Treasury Secretary which eased concerns over extreme policy shifts under the new administration. Later on, Wednesday US PCE inflation data released met expectations, thus not affecting Federal Reserve’s decision regarding rate cuts.

The euro rose by 1.43% reaching 1.0569 this week as US dollars weakened this week. Moreover, traders are expecting aggressive rate cut by the European Central Bank as Euro Area inflation rose to 2.3%. Despite the increase over the course of the week, Euro was the worst performer of the G10 currencies.

Similarly, the British pound appreciated this week against the US dollar by 1.43% reaching 1.2707 as Bank of England is expected to keep interest rates unchanged in December leaving UK rates the highest in the Euro Zone. Also, the Swiss franc appreciated by 0.3% against the US dollar reaching 0.8805 on November 29^th, 2024.

In Asian forex markets, Japanese yen depreciated marginally by 0.25% over the course of the week recording 150.06 reaching six week high as inflation data supported expectation of another interest rate hike in December.

However, Chinese Yuan appreciated by 0.07% to record 7.2401 on November 29^th, 2024 supported by a weakening US Dollar.

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 losses as it reached $2,662.32/ounce on Friday after experiencing fluctuations over the course of the week. On Monday and Tuesday, Gold witnessed remarkable drop after as traders pursued profit-taking and directed towards riskier assets as newly elected president Trump nominated hedge fund manager Scott Besssent to top the US Treasury. It is expected that Bessent will be fulfilling Trump’s plan of tax cut, and reducing expenses.

In addition, reports back then suggested that a ceasefire deal between Hezbollah and Israel lifted traders’ confidence and lowered the demand for the safe-haven asset. In addition, the rise in the US Dollar on Tuesday exerted additional pressure on Gold as Trump announced his plan to impose a 25% tariffs on imports from Canada and Mexico and an additional 10% on Chinese goods. Later on, Gold witnessed 4 consecutive sessions’ gains after latest economic data as robust GDP growth in third quarter, drop in jobless claims, and high personal income and spending supported bets that the Federal Reserve will be cautious in rate cuts in 2025. Moreover, rising geopolitical tension between Ukraine and Russia as the later performed a large-scale attack on Ukrainian energy infrastructure and the fear of launching new attacks through a nuclear-capable ballistic missile.

As for both oil benchmarks, Brent and West Texas Intermediate (WTI) prices also dropped by 3.43% and 4.1% respectively recording $72.59/barrel and $68.32/barrel. Oil prices started the week in red as the market witnessed a technical correction after the rise of 6% previous week as tensions escalated in the war between Russia and Ukraine as the Ukrainian used for the first time British and US weapons and Russia retaliated by using a hypersonic ballistic missiles.  In addition, the ceasefire agreement reached and started Wednesday led to a decrease for a further decrease on Wednesday. Later on, oil prices steadied at around $73/barrel for Brent and $69/barrel for WTI crude in thin trading amid US Thanks Giving holiday. Furthermore, traders are awaiting the OPEC+ meeting in December 5^th, as there are speculations that the meeting will end up with postponing the planned production increase in January due to signs of weak fuel demand from main oil consumers.

It is interesting to note that this week; Arabica Coffee futures hit a multi-decade peak as it reached $3.2 per pound since 1972 due to weather conditions. In details, the dry weather that hit Brazil earlier and below average rainfall damaged the Arabica Coffee trees during the crucial flowering stage. Moreover, heavy rains in Costa Rica ruined 15% of the country’s yearly coffee harvest.

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