Commodities Daily - February 21, 2018

Oil prices ease on stronger dollar and expected build in US crude stocks. EUR/USD and DXY are this morning approaching respective key thresholds of 1.23 and 90, and oil prices in turn have started to build greater sensitivity to the currency in which they are traded. Today, investors are likely to pay increased attention to the weekly US inventory data and price in expectations. We think oil prices will be driven by fundamental and FX factors for the rest of the week in equal amounts. Both are likely to put pressure on Brent, which is likely to slide closer to $64.5/bbl overnight and possibly below $64/bbl later in the week.
Gold prices continue to slide on stronger dollar; further correction likely. Today the eurozone February PMI will be published at 12:00 Moscow time and, more importantly, the Fed minutes from Yellen’s final meeting as Fed chair, at which rates were kept unchanged at 1.50%, will be released at 22:00 Moscow time. The minutes could be a catalyst for a move in 10y US Treasury yields toward 3%, a level last seen in 2013, supporting the dollar. Today, a break of EUR/USD support at 1.2315 would open the way to 1.23 and to gold trading lower later in the day at just above $1,320/oz.