Oil and the US dollar had a more traditional relationship last week than gold.
The greenback rose with investors selling to park their money in US dollar assets, and oil plunged, down some 13% after hitting an 18 month high on Monday of just over $US88 a barrel.
The euro fell 4.1% last week, after a 1.1% rise Friday following the German parliament approval of the country’s part in the Greek bailout.
Also not helping the market were worries about the impact of the oil spill in the Gulf Of Mexico.
A hitch over the weekend with BP forced to postpone an ambitious attempt to cap part of the leaking well.
And elections overnight in the German state of North Rhine Westphalia went against the Government of Chancellor, Angela Merkel, adding to the pressures on the euro today.
That will, however, be a lesser influence compared with the impact of whatever defence mechanism and support package the EU comes up with to defend the currency and the eurozone economies.
That has to re-establish confidence in the euro; if it doesn’t then there will be some nasty falls that could take the European economy back into recession, and drag much of the world with it.
That would see oil prices fall further which will be great for inflation, but not for confidence.
Last week saw the euro fall 6.4% against the yen, which rose 2.4% against the US dollar, proving to be the safe haven of choice for a lot of investors.
The Aussie dollar fell 6.3% against the yen, and shed a lot of ground, around 4.2 USc against the greenback.
That’s a fall of nearly 5% since the previous Friday when the currency closed at 93 USc.
Oil fell again Friday, ending its biggest weekly loss for nearly a year.
Not even the positive US jobs report, which 290,000 jobs created and more than 500,000 in March and April, could help oil.
The sharp fall in a week shows us just how attractive oil has been to investors chasing risky returns.
Friday’s jobs report should have been very positive, but fears about Greece and the health of banks were greater worries.
Many players in the oil markets obviously fear they may not get paid.
So futures fell for a fourth day in a row and settled down $2, or 2.6%, at $75.41 a barrel, after falling further to $74.51, the lowest since February 16.
Losses for the week totalled 13%, the worst since prices fell almost 27% in a single week in December 2008.
Some market reports claimed there was a break downwards in the oil charts and the price could drop under $US70 a barrel.
London Brent crude ended down $US1.56, or 2%, at $US78.27 a barrel.
US oil stocks and consumption are still out of alignment with where some traders think they should be.
Consumption remains weak and stocks too high.
