Oil rebounds on weaker dollar, strong data
Oil prices are rebounding firmly, paring steep losses from the previous session thanks to a weaker US dollar and rising optimism surrounding the global economic recovery.
Strong data from China overnight is supporting oil’s move higher. Caixin service sector PMI data revealed that activity in China’s services expanded at the fastest pace in three months in March, and optimism within companies surged to a 10-year peak. The Caixin services PMI came in at 54.3 in March, ahead of the 51.7 forecast.
The data follows impressive non-farm payroll figures on Friday. Oil bulls are cheering a solid economic recovery in the US and China, the world’s largest oil consumers.
The news is overshadowing concerns surrounding the prospect of increased oil supply, which dominated oil price action on Monday. Oil prices dived more than 4% yesterday on expectations of increased supply from the OPEC+ group between May to July.
API stockpile data will be in focus later, offering further guidance to the market over whether more supply can be absorbed.
Gold looks to FOMC minutes
Gold is edging higher as it continues to build on a recent rebound from multi-month lows of USD1677 struck last week. Sliding treasury yields are undermining the US dollar, supporting the precious metal’s move higher.
Even so, any gains in the precious metal are likely to be capped, given expectations surrounding a fast, strong US economic recovery. The accelerating vaccine rollout combined with President Biden’s USD2 trillion planned stimulus is raising questions over the Fed’s ability is keep interest rates at their current ultra-low level. Attention will now turn towards tomorrow’s FOMC minutes for further clues. Any hints that policymakers could look to tighten policy sooner could result in gold dropping sharply lower.
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