G-3 currencies that are the US dollar, the euro and the yen turn out to be among the weakest G-10 currencies last week. Volatility was suppressed on Monday due to the US holidays.
Nonetheless, reflation trade remains valid. Especially given another leg of oil prices uptrend. This time it is triggered by extremely severe weather conditions in the United States. Blizzards and low temperatures have even reached Texas and result in a significant decrease in output. It may amount to 1 mln barrels per day, accounting for almost one-tenth of the recent US oil extraction. Furthermore, extraordinary weather conditions lead to higher oil demand as power burn demand is on the rise. Regardless of the reasons behind the move, dominating drivers remain in place.
Equity markets are supported, the US dollar is weak and commodities advance. The EUR/USD pair is still capped by 1.2150 mark, but it may break higher. The pound sterling is one of the outperformers and the GBP/USD trades within a stone’s throw range from the 1.40 mark. At the same time, the Norwegian krone and Russian ruble, important oil currencies rally. The USD/RUB exchange rate is on the verge of eroding a crucial area around 73.00, which stays in the way of further falls towards the June lows.
Tuesday is another light day in terms of economic releases. The German ZEW and Eurozone’s GDP numbers for Q4 are key points of interest but are rather unlikely to pull the EUR/USD out of the ongoing stagnation and push the main currency pair towards the mid-January-high at 1.2220.