Gold Plunges after BOJ Shocks Market with Monetary Easing
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December Crude Oil futures traded lower on Friday, but remained inside its two-week range. Overproduction and low demand continue to keep a lid on this market, however, prices have stabilized since Saudi Arabia cut prices to Asia several weeks ago.
The reaction to the move by Saudi Arabia and other OPEC nations including Iraq, Iran and Kuwait seems to be indicating that the next move by these countries is going to be a production cut. This action would definitely put in a major short-term bottom. So for the time being, the price cuts are going to be supportive until its effect wears off. Then OPEC will likely have to decide on more aggressive measures to boost prices.
Recent comments by Saudi Arabia indicate it is comfortable with $80 crude oil. This may be suggesting, however, that it may not be comfortable with oil under $80.
The EUR/USD is trading lower but stable after the European Union’s statistics office reported that consumer prices rose 0.4 percent from a year earlier. This figure was in line with the estimates and slightly better than September’s reading of 0.3%. Eurostat also reported that Euro Zone unemployment held at 11.5 percent in September.
The inflation news took the pressure off the European Central Bank, at least temporarily, to implement fresh stimulus. This could trigger a short-covering rally over the near-term, but at the very least hold the Euro in a range until the next ECB policy meeting.
There were no major economic reports from the U.K. today, but the British Pound traded lower because of the strength in the U.S. Dollar. The GBP/USD is set up to close lower for a fourth straight month. This is its longest losing streak in 4 ½ years. The price action reflects the Bank of England’s reluctance to commit to an interest rate hike. The market may continue to weaken over the near-term because investors believe the BOE will continue to push back its rate hike date.