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Oil rises on DOE draw; markets await the Fed decision

Summary:

  • Oil rises after large DOE drawdown
  • Another US inflation metric hits a 6-year high
  • Cryptos sink on price manipulation concerns
  • GBP dips as inflation remains at 2.4% Y/Y
  • Fed decision at 7pm (BST)

The price of crude has jumped higher this afternoon after the latest US inventory data showed a larger than expected drop. The headline reading of -4.1M was larger than the expected drop of 1.4M and marks an even bigger fall compared to the prior reading of 2.1M.

There are growing signs that US inflation is running hot, with the release of the second above forecast inflation metric in the last two days. Following on from Tuesday’s CPI release - which was the highest in 6 years - today’s PPI number also increased to its highest since 2012. In Y/Y terms today’s reading came in at 3.1% vs 2.8% expected, with the core reading Y/Y being 2.4% vs 2.3% expected.

Today has seen some follow through to the downside in the cryptocurrency space with red across the board. Litecoin is the worst hit and down by more than 7% while Bitcoin is holding up the best in only dropping by 2.71%. One possible reason for the drop could be an academic papers which showed that Bitfinex may have been manipulating the price of Bitcoin, but really it seems to be more a case of just a continuation of the downtrend.  

UK inflation stayed put in May in line with expectations while fuel boosted PPI input prices implying more inflationary pressures to come over the next months. The pound was the worst performing major not long after the release, although it has recovered a little since. The ONS informed that both headline and core inflation stayed unchanged in May at 2.4% and 2.1% yoy respectively matching economists’ anticipations.

The first of two major central bank decisions will occur tonight with the Fed expected to announce a rate hike of 0.25% at 7pm (BST) with Jerome Powell’s press conference 30 minutes later. Here’s a preview of the event which also touches on tomorrow’s ECB decision.   

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