Market Overview

FxPro: Vibrant US economy and optimism around NAFTA motivate Crude Oil rally

Crude oil continues its impressive rally. To the fears of a shortage due to the disruption of supplies from Iran and Venezuela was added some optimism with regard to an increased demand thanks to the international trade increase, which may be reinforced after NAFTA deal and new portion of strong data.

As a result, Brent Crude rose by 2.9% to $85.30 per barrel on Monday, but it gave up some gains later, and has decreased to $84.9, where it remains at the time of writing. The current levels are the next update of highs since 2014, and the movement is amplified by the mass closing of short positions after the quotes fast had grew to multiyear highs.

The US dollar keeps its trend on growth, given the Fed’s confidence in economic prospects.

The production ISM, published on Monday, sank from 14-year highs, but remains within a territory that marks impressive rates of growth. Employment and order components are at a very high level. The ISM notes that the current index level (59.8) corresponds to the annualized GDP growth of 5.1%. This news became a significant driver for the growth of oil quotes yesterday at the end of the day.

The dollar index is traded near the three-weeks maximums, and the EURUSD pair remains under the 1.16 mark partly because of the investors’ concern around the sustainability of Italy’s debt burden. The common currency and European debt markets have been experiencing an increased demand for safety since the end of last week.

The populist government has agreed on a budget with a significant deficit, causing a new wave of concern about the risk of insolvency at a debt load of 132% of GDP and under the rising interest rates.

However, it is worth noting that the concern about the sustainability of Italian debt markets does not harm the global sentiments yet. It is still very early to compare the situation with the Greek debt crisis: Italy does not threaten to exit from the Eurozone, and the confident growth in the world and in other European countries effectively curbs the spread of risks in other markets.

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