Different assets rallied across financial markets in the past 24 hours in a synchronized systemic move, including the WTI crude oil prices that rallied 5 percent on Wednesday in the best daily move in over 4 months. As the USD and the UK 30-year government bond yields fell, oil alongside gold and S&P gained 500 futures.
The recent market-moving event originated in the United Kingdom. The Bank of England (BoE), in a limited amount, effectively restarted quantitative easing, notwithstanding the highest inflation in years.
The markets punished the Sterling as it briefly hit a record low on Monday.
Crude oil is closely linked to the move of the global business cycle. After the BoE’s action, global government bond yields dropped, even in the United States. This showed a dovish move in monetary policy expectations. Markets went from pricing in almost 2 Fed rate hikes in 2023 to less than 1. Less hawkish central banks could reduce global growth slowdown bets.
If Asia-Pacific markets extend Wall Street’s rosy session, ten WTI could enjoy another positive day. On the other hand, Fed policymakers may provide the possibility of a pivot or a measure like the BoE did along the way, which could set crude oil up for disappointment.
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