Oil & Gold Prices Mount While Dollar Drops as US Inflation Rose Along Expectations

 *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 234.79 points on January 17^th, 2025. Since the start of the year, we notice that the NEER Index rose by 0.25%.

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 0.5% to 109.104 as US inflation rate increased only marginally as anticipated to record 2.9% annually, thus supporting bets that the Federal Reserve will cut rates this year and most probably in the first half of the year.

The euro appreciated by 0.48% reaching 1.0293 this week. It started the week with a huge decline as it reached its lowest since October 2022 as rate cut expectations by European Central Banks rose due to potential tariff increases by Trump’s administration. In addition, inflation persisted as energy prices increased amid increased sanctions on Russian companies that led to decrease in Russian oil exports. Then, Euro increased marginally to around 1.03 as rumors reveal that Trump’s administration tariffs could increase gradually to avoid inflation spikes.

Similarly, the British pound depreciated this week against the US dollar by 2.73% reaching 1.2186 as UK fiscal concerns are high, although Bank of England is expected to perform one rate cut this year as December inflation declined and reached 2.5%.

In Asian forex markets, Japanese yen appreciated by 1.23% over the course of the week recording 155.78 and marking the strongest week since November 2024. It is anticipated that Bank of Japan might increase rates in the upcoming meeting next week after signals from the Governor and his deputy that strong inflation and wage data supports it.

Similarly, Chinese Yuan appreciated by 0.05% to record 7.3288 on January 17^th, 2025 supported by stronger than expected economic data as GDP met the target and rose by 5.4% annually in the fourth quarter of 2024.

Commodities Market

 *Prices are as of the time of writing this report

In commodity markets, Gold prices are set to end the week with gains for the third consecutive week as it reached 2,707.32/ounce on Friday following US inflation data that supports less restrictive monetary policy by the Federal Reserve this year.

As for both oil benchmarks, Brent and West Texas Intermediate (WTI) prices also rose by 1.99% and 2.98% respectively recording $81.35/barrel and $78.85/barrel after new sanctions were imposed on two big Russian oil companies that operate 180 vessels. In addition, US Energy Information Administration (EIA) revealed that US crude oil inventory dropped 1.96 million barrels, exceeding forecasts.

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