On Tuesday, China spooked the markets by announcing that it would raise its lending and deposit interest rates. The stated goal of the move was to reduce inflation and curb economic growth that some saw as overheating.
The measure seemed to succeed – temporarily – as it sent investors running into the U.S. dollar, undercutting the prices of commodities and risk assets around the globe. This all benefits China, which prefers to see the yuan depreciate relative to the dollar in order to maintain its exports, and wants to see the prices of raw materials decline.
The next day, however, it was business as usual, as the dollar resumed its slide and commodities like oil, gold and copper rose.
On the IntercontinentalExchange, benchmark West Texas Intermediate light, sweet crude oil futures rose 2.765 percent to trade at $82.44 per barrel. Brent crude oil futures jumped 2.874 percent to $83.50 per barrel.
While some of this gain might be coming from an analysis of the oil market's fundamentals and the prospect for continued growth across the emerging markets, a significant fraction of the price movement likely stems from commodities futures brokers and traders getting back into the risk trade.
There's also the complex feedback loop that exists between oil futures and the global economy: As the price of oil heats up, it makes every aspect of economic life more expensive, which tends to dampen growth.
Falling growth then puts pressure on the price of oil; and the prospect of quantitative easing throws a new and unpredictable effect into that equation.
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