The US Dollar gained some traction yesterday as the global energy crisis dampened the markets positive sentiment. After a positive start to the week both Sterling and the Euro lost ground against the Dollar, with both pairs recording losses in the session.
Oil prices have increased by over 50% in 2021 and after OPEC+ said on Monday “it would stick to an existing pact for a gradual increase in oil output”, crude prices shot up to three-year highs adding to “inflationary pressures that consuming nations fear will derail an economic recovery from the pandemic”. As a result, here in the UK analysts have warned energy prices “could rise by hundreds of pounds next year”. Energy regulator Ofgem has said “the energy price cap covers around 15 million households and will ensure that consumers don't pay more than is absolutely necessary this winter”. However, the regulator also noted that “if global gas prices remain high” they would have to “update the price cap”.
As the Dollar took advantage of the adverse market conditions, GBPUSD sank. Opening at 1.3602, Cable came under significant selling-pressures and closed at 1.3568.
GBPEUR in contrast made minor gains on the day. The pair opened at 1.1748 and closed at 1.1751.
This latest crisis has had a direct negative impact on the Euro. Kadri Simson, European Commissioner for Energy, has claimed “Brussels is powerless to prevent the gas price surge that is hitting consumers across Europe”. While Simson asserts “the reasons behind high energy prices are not created here in Europe”, France, Spain, and various other EU member states “have demanded Brussels to provide immediate palliative to protect households and consumers from rising costs”.
EURUSD made a loss on Wednesday. The pair opened at 1.1578 and closed the session at 1.1545.