Breakdown of the latest developments on the global exchanges
Oct 14, 2021, 8:57 AM GMT

Global Markets Embroiled in the Energy Crisis, the Dollar Sinks Lower

Global Markets Embroiled in the Energy Crisis, the Dollar Sinks Lower

The fallout from the brewing energy crisis is already being felt across different markets, as the price of natural gas just hit a 7-year high. So far, the biggest ripple was registered on the price of crude oil. Check out our latest analysis of the commodity to get a better understanding of the broader market sentiment.

The global energy crisis continues to exacerbate pressures across different markets as the situation develops. Gas shortages in Europe ahead of the winter months have sparked major concerns across the continent of a persisting supply squeeze.

Even though Russian President Vladimir Putin has vowed to supply extra gas to Europe, as needed, many fear that current distortions to the global supply chains may deepen the gas squeeze.

Heightened demand for gas is likely to dent the already fragile global recovery amidst hit and miss economic data. While headline unemployment in Britain and the U.S. sunk in September, the two labour markets expanded below market forecasts. Meanwhile, factory activity and consumption in the Euro Area remain massively subdued.

The rally of natural gas is also drivivng the price of crude oil higher, while gold and the U.S. dollar index remain subdued

The price of natural gas is currently strengthening above the 23.6 per cent Fibonacci retracement level at 5.513, as shown on the 4H chart above. This temporary consolidation above the major resistance-turned-support is likely an interim stop within the broader rally.

Soaring gas prices are also driving the price of crude oil up north, as the two seem to be advancing more or less parallel to each other. Meanwhile, the advancing energy sector is pushing down the demand for lower-risk securities. This is exemplified by the widening gap between crude oil on the one side and gold and the greenback on the other.

The energy crisis to affect households as well

The fallout from the gas squeeze is also likely to extend to households from continental Europe to the U.S. as the heightened energy demand drives inflation pressures higher.