Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20
Does the Stock Market Really "See" the Future? - 12th Sept 20
Basel III and Gold, Silver and Platinum - 12th Sept 20
Tech Stocks FANG Index Nearing Critical Support – Could Breakout At Any Moment - 12th Sept 20
The Tech Stocks Quantum AI EXPLOSION is Coming! - 12th Sept 20
AMD Zen 3 Ryzen 4000 Questions Answered on Cores, Prices, Benchmarks and Threadripper Launch - 12th Sept 20
The Inflation Mega-trend is Going Hyper! - 11th Sep 20
Gold / Silver Ratio: Slowly I Toined… - 11th Sep 20
Stock Market Correction or Reversal? The Jury Isn't Out! - 11th Sep 20
Crude Oil – The Bearish Outlook Remains - 11th Sep 20
Crude Oil Breaks Lower – Sparking Fears Of Another Sub $30 Price Collapse - 11th Sep 20
Inflation by Fiat - 10th Sep 20
Unemployment Rate Drops. Will It Drag Gold Down? - 10th Sep 20
How Does The Global Economy Recover After This Global Pandemic? - 10th Sep 20
The Best Mobile Casino - 10th Sep 20
QE4EVER! - 9th Sep 20
AMD Ryzen Zen 3 4800x 10 Core 5ghz CPU, Cinebench Benchmark Scores (Est.) - 9th Sep 20
Stock Traders’ Dreams Come True – Big Technical Price Swings Pending on SP500 - 9th Sep 20
Should You Be Concerned About The Stock Market Big Downside Rotation? - 9th Sep 20
Options Traders Keep "Opting" for Even Higher Stock Market Prices - 8th Sep 20
Gold Stocks in Correction Mode - 8th Sep 20
The law of long-term time preference and Gold ownership - 8th Sep 20
Gold Bull Markets: History and Prospects Ahead - 8th Sep 20
Sheffield City Centre Coronavirus Shopping Opera Ahead of Second Covid-19 Peak - 8th Sep 20
Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
From Trump’s TikTok Mess to US Tech Cold War against China - 7th Sep 20
The Federal Reserve vs. Judy Shelton And Gold - 7th Sep 20
Fed Dials Up Inflation Target…Own Gold - 7th Sep 20
Does Gold Still Have Plenty of Potential? - 7th Sep 20
CDC Shock Admission - THERE IS NO PANDEMIC! Over 90% of Deaths NOT From COVID19 - 7th Sep 20
Stock Market SPX to Gold/Silver Ratios Explored – What To Expect Next - 7th Sep 20
Is the Precious Metals Market really Overwhelmed and Chaotic - 7th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Cheap Oil Good for Consuming Countries, but won't help EUR or JPY

Currencies / Forex Trading Dec 19, 2014 - 08:58 AM GMT

By: MahiFX

Currencies

Cheap oil is good for the economies of the US, Europe and Japan and the recent plunge in prices should support the USD, but for the EUR and JPY the dynamics are more nuanced.

The interpretation many commentators are drawing from plunging oil and commodity prices is that the global economy is slowing and that deflation will become more persistent. However, if the global economy is slowing – cheaper oil will be a good tonic. And low energy prices are actually a form of good deflation for consuming countries.


Nonetheless, for central banks fixated with fears of deflation – the Bank of Japan and European Central Bank – it represents another reason to pursue very expansive monetary policies and even increase them. So in the short to medium term, falling oil prices could be a negative for EUR and JPY. Under normal circumstances lower energy prices would be bullish for both currencies.

For the US, cheaper energy prices will dampen down inflation and could see the US Federal Reserve hold back on interest rate rises for longer than it anticipated. Indeed, the Fed stuck with its relatively dovish stance, promising to “be patient” at its latest FOMC, but did note that energy is not the only deflationary input.

Cheaper oil = cheaper JPY?


When US rate rises come – they could go up quickly

Rolling back on rate rise expectations will help many of the struggling emerging market currencies, which have become victims of the change in US monetary policy and falling commodity prices.

Meanwhile, US growth is robust and was already expected to accelerate next year. Cheaper energy will further stoke the US economy with the implication that once lower energy prices have fallen out of the inflation numbers – interest rates could rise in H2 and possibly quite quickly.

Interestingly, the USD is increasingly behaving like a 'risk' currency as capital flows into assets such as US equities from growth-starved Europe and Japan. This could make the performance of USD more sensitive to numbers such as GDP.

The one big caveat to a rising USD is that if it did trigger a crisis in emerging markets, particularly with countries which borrowed in USD, it could spur central bank action to stem its rise. That's not on the cards at the moment as Japan, the Eurozone and many others would love a stronger USD so they can more easily export to the more vibrant US in a bid to rediscover growth at home.

By Justin Pugsley, Markets Analyst MahiFX

http://mahifx.com

Follow MahiFX on twitter

For media enquiries contact: Michele McDermott-Fox, The Top Floor Agency.
T: +44(0)1625 502 545 |M: +44 (0)7729 501 369 | E: michele@thetopflooragency.com

About MahiFX

MahiFX is headed by David Cooney, former global co-head of currency options and e-FX trading at Barclays Capital and responsible for the award winning e-commerce platform BARX and Susan Cooney, former head of e-FX Institutional Sales in Europe for Barclays Capital. Operating as a market maker, MahiFX provides traders direct access to institutional level execution speeds and spreads through its proprietary-built fully automated pricing and risk management technology, lowering the cost of retail forex trading.

MahiFX global operations are headquartered in Christchurch, New Zealand with offices in London, UK with development and support teams in both locations for 24 hour service. The company is regulated by The Australian Securities and Investments Commission (ASIC), Australia’s corporate, markets and financial services regulator.

© 2014 Copyright MahiFX - All Rights Reserved

Disclaimer: This material is considered a public relations communication for general information purposes and does not contain, and should not be construed as containing, investment advice or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. MahiFX makes no representation and assumes no liability as to the accuracy or completeness of the information provided.

The use of MahiFX’s services must be based on your own research and advice, and no reliance should be placed on any information provided or comment made by any director, officer or employee of MahiFX. Any opinions expressed may be personal to the author, and may not reflect the opinions of MahiFX, and are subject to change without notice.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules