Oil prices fall as investors are concerned about US economy

Oil prices declined on Wednesday following a 5% drop in the previous session. Investors are concerned about the state of the US economy ahead of the Federal Reserve's anticipated interest rate hike later in the day. Brent futures decreased by 1.4% to $74.25 per barrel, while West Texas Intermediate (WTI) crude dropped by 1.6% to $70.51. These benchmarks hit their lowest point since late March in the previous session.

The Federal Reserve prepares to hike interest rates

The Federal Reserve is expected to raise interest rates by 25 basis points (bps) to combat inflation, continuing its long-running battle. Meanwhile, the European Central Bank (ECB) is also anticipated to increase rates at its regular policy meeting on Thursday. Further rate hikes may hinder economic growth and have an impact on energy demand. The recent concerns about the health of the US banking sector and downbeat US jobs data do not ease fears that the US economy is heading toward a shallow recession.

Central banks across the world tighten policies

The Australian central bank recently shocked markets by raising its cash rate on Tuesday and indicating that it may need to increase it further to address high inflation. These moves by central banks may affect forex markets by impacting the value of currencies against one another.

Manufacturing data in China pushes energy prices down

Manufacturing activity in China unexpectedly dropped in April, resulting in a reduction in diesel demand. This news led to US heating oil futures dropping to their lowest level since December 2021. Since China is the world's largest energy consumer and top buyer of crude oil, the slowdown in its economy could also have an impact on forex markets, particularly on currencies that are involved in global trade.

OPEC output decreases and crude stockpiles fall

According to a Reuters survey, OPEC oil output fell by 190,000 barrels-per-day in April, mostly driven by Iraq and Nigeria. May's output is predicted to decrease even further as a new round of voluntary cuts that were announced on April 2 goes into effect. US crude stockpiles fell for the first time since December, decreasing by around 3.9 million barrels last week, according to market sources that cited American Petroleum Institute (API) figures on Tuesday. Morgan Stanley also lowered its Brent price forecast for 2023 to $75 per barrel.

Forex Impacted by Interest Rates and Economic Indicators

The forex market may be affected by the expected interest rate hikes from the Federal Reserve and the European Central Bank, as central banks tighten their monetary policies. Furthermore, the recent decline in manufacturing activity in China and the decrease in crude oil prices could have an impact on forex markets, particularly those that are involved in global trade. Traders should keep an eye on the news and trends in the market to make informed decisions in the forex market, as the oil price tumble could have a ripple effect on other commodities and the global economy. It is essential to stay informed about the market's events to mitigate risks and seize opportunities in forex trading.