Despite the Middle East tensions and punchy U.S. economic readouts, U.S. crude prices turned tail and have now recoiled some 6.5% from Friday’s 2024 highs to levels last seen before Israel’s attack on Iran’s Syrian consulate on April 1.
Surging U.S. crude inventories, poor economic numbers from China for March and a U.S. warning about releasing more of its Strategic Petroleum Reserve if necessary have all reined in oil.
And it’s retreat eases at least some of the inflation anxiety irking bond markets and the Fed and U.S. Treasury yields have fallen back in tandem. Having briefly topped 5% this week, two-year Treasury yields have dropped 10 basis points since.
The dollar, similarly, has come off the boil – partly after a warning shot from Japan, South Korea and the United States about potentially destabilising currency moves in Asia.
With markets keeping an eye on G7 and G20 finance chiefs in Washington at the International Monetary Fund meetings, the rare three-way statement agreed to “consult closely” on FX markets, acknowledging concerns from Tokyo and Seoul over their currencies’ recent sharp declines.
The dollar/yen pair fell back slightly from 34-year highs, although it remains stuck above 154, and South Korea’s won backed away from its weakest in almost 18 months.
Easing market concerns that China may allow its yuan to weaken into a competitive regional exporting scramble too, China’s deputy central bank governor Zhu Hexin separately on Thursday restated Beijing’s “determination in keeping the yuan exchange rate basically stable.”
The steadier bond and currency complex helped soothe edgy stock markets around the world as first quarter corporate earnings stream in and attention switches to major tech sector updates.
