U.S Dollar & Natural Gas – The Perfect Bull Story

Date: August 31st

With critical news coming from the U.S job market on Friday, volatility is ticking up as traders prepare for a hard landing. Natural Gas and U.S Dollar prices remain the bull story of the year, just how far can this go？

The implications of a higher U.S Dollar

If you are someone trading the financial markets, you have probably realised at some point that buying USD pairs has been a fruitful strategy.The U.S. dollar is having its best run in 20 years. This is not usually a good sign for the global economy, and here are the reasons why:

o   It makes exports more expensive, which can lead to lower GDP (economic growth) for the U.S.

o   Increases imported inflation as it costs more of a weaker currency to buy the same number of dollar-denominated products and services.

o   Lowers U.S corporate earnings as exports become less competitive globally.

o   Commodities traded in USD become more expensive, such as oil.

o   Deglobalisation can occur as countries move away from the US dollar. This is particularly true if China decides to look elsewhere.

o   A strong dollar is a classic sign that something damaging is happening in the global economy, which is true at the moment.

The dollar run is predicted to go on for at least the remainder of this year, meaning any pullbacks could be met with impulsive buying. This could also mean risk assets continue to fall.

Russia Tighten the Gas Screw

In recent breaking news, gas supplies via Nord Stream have been completely stopped via Gazprom. This has heightened fears of a complete cut-off of Russian gas to Europe.

Goldman Sachs recently warned higher gas prices would be the main driver for higher UK inflation.

From a fundamental standpoint, this could see natural gas prices making a broader move towards $10 on the chart.

Everyone at Zenfinex hopes you are having a great trading week. If you would like to know more about the products we offer, feel free to visit www.zenfinex.com.

Disclaimer:  Trading Foreign Exchange is highly speculative and may not be suitable for all investors. The leverage created by trading on margin can work against you and losses can exceed your entire investment. Only invest with money you can afford to lose and ensure that you fully understand the risks involved.