Dollar rallying after hawkish Federal Reserve yesterday; Oil remains under pressure.

Dollar rallying after hawkish Federal Reserve yesterday; Oil remains under pressure.

Posted on Thursday, May 4 2017 at 2:45 pm GMT+0000

Dollar rallying after hawkish Federal Reserve yesterday.

The US dollar ended the last week’s decline that resulted from growth slowdown, and got firmer after the Federal Reserve meeting yesterday.

The interest rate hike probability during June meeting rose from 69% to 93% after the committee considered the slowdown in first quarter growth to be a temporary.

Although the dollar rose against most other currencies and gold, the lack of a big post-FOMC move suggested that the Fed meeting was not the big event of the week but rather Tomorrow’s non-farm payrolls will be of greater importance. In my opinion, Specific attention shall be paid to the wage component, given the direct relation that exists between wage rates and consumers’ purchasing power.

The slowdown in growth is largely due to weak consumer capacity and low consumer spending due to rising inflationary pressures compared to relatively study wages. Therefore, the focus should be on wages in the coming period.

Oil remains under pressure.

Oil continues to slide for the fourth consecutive day, attempting to post a new five-week low, due to raising concerns about increasing US oil production and growing supply.

The US Energy Information Administration reported an increase by 20,000 barrels, last week. This was the 11th straight weekly increase in a row, the production output reached its highest level since August 2015.

If OPEC couldn’t extend the cut-off agreement for additional six months, I expect oil to reach 42$ again. If the issue of supply was addressed, oil would move higher and trade between 45 and 50 in the coming months.