Article / 07 July 2016 at 23:39 GMT

US Market Wrap: EIA report maims oil and spooks FX

FX Consultant / IFXA Ltd


  • Japan:  Bank lending, Current Account and Trade Balance                2350 GMT                                                                        
US Data released :

  • ADP Employment change (Actual 172000 vs forecast 159,000) 
  • Initial Jobless claims (Actual 254,000 vs. forecast 270,000) 
  • EIA Crude Oil Stocks change (-2.22 m/b vs. previous gain of $.05 m/b) 

It was another wild ride on the FX rollercoaster today. The US dollar was modestly offered when the New York day started. Then a spate of better-than-expected US data was released.

Traders started having second thoughts about selling dollars and some openly wondered, “what the heck is cable doing above 1.3000?”.

But when the EIA announced a 2.22 million barrel drawdown in weekly crude stocks there were no more second thoughts or concern about cable’s level. The US dollar soared.

GBPUSD plunged from a high of 1.3047 down to 1.2877 and closed at 1.2907. USDJPY sank to 100.57 from 101.22. EURUSD moves were rather subdued compared to the other G10 currencies but the single currency still found itself at well off its overnight peak.

The oil price plunge on news of a drawdown in US crude stocks seems like an over-reaction to what appears to be a positive development - that US oil supplies are being reduced.

Perhaps the trigger was the line in the EIA statement that said “US crude inventories are at historically high levels for this time of year”. Prior to the data release, WTI was drifting higher and had touched $48.32 before the bottom fell out of the barrel. 

It hit a low at $44.87 before clawing its way above $45.00.


TradingFloor contributor, Neil Staines puts another spin on the Brexit aftermath in his article: We might be at peak Brexit overhang

 And then it was on again: USD goes into Friday's employment data highly bid. Photo: iStock

-- Edited by Adam Courtenay

Michael O'Neill is an FX consultant at IFXA Ltd. Follow Mike or post your comment below to
engage with Saxo Bank's social trading platform.

Missed a day? Here’s what we had to say during our Asian session and our regular European Morning Markets, From the Floor and Mid-session Europe. 
08 July
John Roberti John Roberti
dear Michael, the eia report brought back the oil WTI to 45D/b because the gasoline consumption in the us was basically reported flat while the market was sure that it would go up with the holiday season and also because the slight reduction in production came from Alaska maintenance rather than 48 states shale oil potential crisis thus it became clear that without a drop of price the market would not reach to equilibrium. Today the market does not look to much to oil stock because the market knows tat the stocks are rather high and the imbalance between exports and imports affect the stock levels and thus if imports decline, the better for the financial costs of stocking. thus the EIA preliminary report of last Sunday was right
08 July
Michael O'Neill Michael O'Neill
Thanks, John. good summary


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