USD pulls back as prospects of dovish Fed increase

EURUSD at its highest level in almost a year as traders await ECB member speeches and next week's Fed decision. The main currency pair has extended its upward move and is trading around 1.09 after reports emerged suggesting that the Federal reserve will go ahead with its 25 bp increase in the upcoming meeting which will be preceded by a media blackout from the US central bank. Meanwhile the European central bank appears to be continuing its strategy aimed at combating the massive inflation issue which has severely impacted consumers across the continent by extending the series of 50 bp rate increases. While US stock markets and riskier assets like crypto currencies appear to be benefiting from this narrative, it remains to be seen if the Fed will meet those expectations, as any major shift from expectation could cause a significant increase in volatility and a rebalancing of asset dominance. 

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Oil.WTI approaching YTD highs while brent continues upward move

Both Brent and WTI have benefited lately from an improved economic sentiment and prospects of an increase in demand from China, the world's second largest economy. After a difficult start to 2023, which saw prices drop over 10%, we have seen a significant recovery in energy commodities as improving economic outlooks and potential lower rate increases from central banks boosted optimism regarding the oil market while leading Brent to trade around $88 as WTI tests the $82 level. This is particularly true considering how unlikely a readjustment of supply from OPEC could be in the short term as the group will probably wait to modify its production target even if there is a substantial increase in demand. In either case, oil traders will be on high alert as prices attempt to break through recent highs and as a major shift in demand prospects from the world's biggest economies could lead to a trend inversion as we have seen in recent times.