Wed, Feb 01, 2023 @ 10:15 GMT
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Oil Surges on Inventories Draw; Dollar Drops Against Yen Despite Upbeat Construction Figures

Today’s European session was a relatively quiet day as no major data releases were reported. US figures pointing to healthy construction activity and crude oil inventories were the main figures of the day. The dollar continued sliding against the yen while sterling and the euro were under some pressure against the greenback.

US homebuilding rebounded more than expected in June after declining for three consecutive months. However, this pick-up did little for the second quarter expansion that remained subdued when compared to the prior two quarters. Housing starts rose 8.3% relative to the previous month, standing at 1.215 million units. This was above the expected rate of 5.8%. The rise in construction activity was broad-based. At a monthly rate of 7.4%, building permits increased as well to reach a total amount of 1.254 million. This was well above the expected growth rate of 3% and the estimated number of issued permits of 1.2 million. Even though the figures came in above expectations, builders’ sentiment slid to an eight-month low. An industry report released yesterday showed that homebuilders in the US have lost their post-election enthusiasm as rising costs for materials started to pinch and there are no signs of expected deregulation and tax-reform to help growth.

Looking at the forex markets, the dollar ignored the upbeat figures released today and fell further against the yen. Dollar/yen was last trading at 111.62.

The euro was under some pressure against the greenback today ahead of the European Central Bank meeting tomorrow. It will be ECB President Mario Draghi’s first public appearance following the meeting in Sintra, Portugal. Market participants are eager to get his latest thinking on the outlook for monetary policy in the eurozone and potential for monetary tightening from this autumn. Euro/dollar was last trading at 1.1516.

Sterling was also under pressure against the dollar during the day, to last trade at $1.3017.

The loonie reacted positively on upbeat manufacturing sales data out of Canada. Manufacturing sales rose 1.1% in May relative to the previous month, coming in above expectations of 0.8%. Sales in the transportation equipment and chemical manufacturing industries drove the gain. However, this boost was also helped by a downwardly revised figure for April (down to 0.4% from 1.1%). Dollar/loonie slid to 1.2585 following the release.

Oil prices surged on a bigger than expected fall in US crude inventories for the week ending July 14, a report by the US Energy Information Administration showed. The draw was 4.727 million barrels, against expectations of 3.214 million barrels. Brent was up 1.3% to last trade at $49.46 a barrel, while WTI was up 1.4% to last trade at $47.03 a barrel.

Gold was under pressure today with the precious metal trading at $1,241.03 an ounce as the European session was about to close.
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