Global commodity and currency markets headed for a stormy and volatile weekend, after the ongoing military and security confrontation between the United States and Iran caused a geopolitical risk premium in oil prices, amid real fears that the energy shock could spill over to global inflation levels.
The benchmarks (Brent and WTI) recorded sharp weekly gains that exceeded the 11% mark, while gold and silver remained under selling pressure from expectations that high US interest rates will continue longer, while the dollar index headed for a limited weekly loss despite benefiting relative from safe-haven inflows.
Financial reports released on Friday (July 17th) confirmed that trading in the exchange and commodity markets accurately balanced the risks of oil-led inflation with the impact of this on central banks' decisions on monetary tightening, which rein in some investment assets.
Oil jumps by a record 11% and US inventories fall
Brent crude futures for September delivery rose 0.4% to $84.54 per barrel, while U.S. West Texas Intermediate crude rose 0.7% to trade at $79.52, with oil prices recording a total weekly gain of more than 11%, according to Investing.com data.
Energy sources revealed that the current wave of rises is driven by the continuation of mutual military strikes between the United States and Iran and the slowdown in the passage of ships and tankers through the strategic Strait of Hormuz, through which nearly a fifth of the world's oil supply passes, but the pace of the rise has been balanced by dealers' bet on the ability of other producers to make up for any potential supply shortages.
The U.S. Energy Information Administration (EIA) said U.S. crude inventories provided additional price support after falling by 1.7 million barrels in the week ended July 10 to 409.7 million barrels, while gasoline inventories fell by 1.5 million barrels to 231.2 million barrels.
Gold and silver under pressure from inflationary expectations
Spot gold rose 0.47% to $3995.35 an ounce as technical buying at lower levels, while futures rose 0.18% to $3999.22, but the precious metal remained down about 3% for the week, heading for its biggest weekly loss since early June.
Tony Sycamore, senior market analyst at IG Financial Group, said that gold's weak response to weak US inflation data is not a positive sign in the near term, noting that the $3942 level is an important technical support stimulus, while an uptrend improvement requires a break above the $4140 per ounce level.
The technical data indicated that the price of spot silver fell by 0.18% to reach $55.43 per ounce, affected by the same negative factors that put pressure on gold, as well as its high sensitivity to the global industrial demand outlook, reflecting the market equation that sees the risks of oil inflation raising interest expectations and thus putting pressure on commodities that do not provide a periodic return.
Dollar Heads to Weekly Loss, European Currencies Advance
The US dollar index settled at 100.72 points, recording a weekly decline of 0.24%, after imported US inflation data prompted investors to reduce their bets on the Federal Reserve (US central bank) to raise interest rates in its next meeting, as the probability of a hike for the month of July fell to 11% compared to 25% a week ago.
The security escalation in the Middle East has limited the greenback's losses thanks to its designation as a preferred safe haven and the highest returnee of the G10, the banking group said that its current moves mimic the "dollar smile" theory, in which it benefits from both the strength of domestic economic data and the widening global geopolitical risks.
Trading screens showed the single currency (euro) stabilizing at $1.1437, heading for a weekly gain of about 0.2% as the European Central Bank (ECB) decision awaits next week, while the pound traded at $1.3476, recording a weekly gain of 0.56% and a third consecutive weekly gain supported by the dissipation of concerns related to British public finances.
Relative stability for the Egyptian pound and the Turkish lira
The latest official Egyptian pound price published at the Central Bank of Egypt on July 16 recorded a balance of 50.4774 pounds for buying and 50.6169 pounds for selling against the US dollar, reflecting the relative stability of the Egyptian currency around the levels of 50.5 pounds weeks ago.
Spot trading of the Turkish lira indicated that it stabilized near the levels of 47.05 lira per dollar, to remain very close to its historical lows recorded, as the exchange rate in buying and selling transactions in the Turkish financial markets ranged between 47.05 and 47.06 lira to the dollar.