Thursday, 21 Jan 2010

USD Still Rising; Oil Plummets towards $75 a Barrel

Today's market movements fell in line with many of today's expectations. Given the series of negative data releases from Europe over the past few weeks, not many analysts were expecting today's manufacturing and services figures to improve the situation. European data fell short of expectations, leading the EUR to continue declining against many of its major counterparts.

Risk aversion in the market also continued to grow as the opening of the American markets failed to return any optimism regarding current conditions. US Unemployment Claims rose more than expected, and the Philly Fed Manufacturing Index declined sharply, pushing many US stocks lower while driving the value of the safe-haven USD higher.

Today's Crude Oil Inventories report did in fact carry more weight than previous figures, but the impact of this result was one few were anticipating. Many were expecting a rise in inventories, which resulted in a "priced-in" effect which held oil steady near $78 a barrel. When inventory data failed to meet expectations, the priced-in value was removed and oil fell to a more realistic level near $76 a barrel. Much data seems to suggest that spot crude oil prices may continue deteriorating as fundamental support is lacking.