With foreign currencies tumbling, anything traded in US dollars will cost more... such as oil. Unsurprisingly, crude oil has been unable to hold onto earlier gains, and has turned lower as the demand outlook deteriorates further.
There’s also another risk that is not being discussed much in the markets right now: a full-blown emerging market (EM) currency crisis. They are falling one after another. Turkish lira, Indian and Pakistan’s rupees, Chinese yuan, you name it. With all these currencies tumbling, so does the purchasing powers from those nations.
Among the EM currencies, the Turkish lira has been under the spotlight after it tumbled to a fresh low against the dollar, as the Fed hiked rates by 0.75% while the CBRT cut rates by 1 percent last week.
More pain is likely now for the lira, given how bad the inflation situation is there right now. With a weakening currency and rising USD, imports of crude oil and other key commodities are going to cost more.
It is a similar story for other EM markets, and not just EM (UK, eurozone etc.)
Consumer and business spending is going to get squeezed even more. The outlook for oil thus remains bearish.
WTI has turned lower after testing testing the $80 handle. Expect the selling pressure to continue...
By Fawad Razaqzada on behalf of FOREX.com
There’s also another risk that is not being discussed much in the markets right now: a full-blown emerging market (EM) currency crisis. They are falling one after another. Turkish lira, Indian and Pakistan’s rupees, Chinese yuan, you name it. With all these currencies tumbling, so does the purchasing powers from those nations.
Among the EM currencies, the Turkish lira has been under the spotlight after it tumbled to a fresh low against the dollar, as the Fed hiked rates by 0.75% while the CBRT cut rates by 1 percent last week.
More pain is likely now for the lira, given how bad the inflation situation is there right now. With a weakening currency and rising USD, imports of crude oil and other key commodities are going to cost more.
It is a similar story for other EM markets, and not just EM (UK, eurozone etc.)
Consumer and business spending is going to get squeezed even more. The outlook for oil thus remains bearish.
WTI has turned lower after testing testing the $80 handle. Expect the selling pressure to continue...
By Fawad Razaqzada on behalf of FOREX.com