Oil and dollar worries send euro to new high


Speculation over a rate cut by the US Federal Reserve today (30 October) has driven oil prices close to US $95 and gold prices to their highest since 1980. The euro has reached a new all-time high of US $1.44.

Reacting to the US banking and real estate crises, the Fed is expected to cut interest rates by another 0.25% on 30 October, following a similar step on 18 September. As a result of the first rate cut in four years, investors are taking flight from US government bonds into commodity stocks and other currencies, namely the euro, analysts say. 

As a result, the euro reached a new all-time high of US $ 1.4438 on 29 October. European and Asian stock markets saw a strong boom, with institutional investors in particular showing a strong preference for energy stocks. Consequently, the petrol price rose to US $93.80. 

A number of other reasons further contributed to the raise in oil prices:

  • The US failure in Iraq and speculations on US military involvement with Iran is contributing to further destabilisation of the Middle East region;
  • the energy consumption of evolving economies such as India and China is increasing at a fast pace and is expected to continue to do so, and;
  • a number of recent authoritative reports have dampened expectations regarding the world’s remaining energy reserves. 

On 7 November, the International Energy Agency will present the 2007 edition of the World Energy Outlook, focusing on rising consumption in China and India. 

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