Recent stronger economic data in the US bolstered the dollar and simultaneously dented oil prices. For the four weeks to 17th May, Mintec’s dollar index climbed 0.98%, settling at 102.96, whereas the Brent crude oil price slumped 11.5%, to $75.25/barrel.
Stronger economic data during the week commencing 15th May, specifically lower jobless claims, raised expectations among market participants that the Federal Reserve may continue to raise interest rates at its next meeting in June; only last week, around 90% of market players had factored in a rate pause. In addition, talks to find a solution to the US debt ceiling issue are reportedly progressing well between the White House and Congressional leaders.
Recent economic strength has since weighed on the oil price, as a stronger dollar makes oil more expensive for buyers holding other currencies. The oil market had recently been supported by output cuts by the Organization of Petroleum Exporting Countries (OPEC), but players state that the economic developments have added bearish sentiment to the market.