Tuesday, June 22, 2010
Phil Flynn: The Oil Market Re-Evaluates China’s Re-Valuation
Mainly I am talking about gold and oil but other commodities that have speculated for months on the Chinese government allowing their currency to “float” may have already bought the rumor and sold the fact. Besides, despite what you might think, this unclear valuation in this environment may not be as bullish for demand as some might think. Despite the increase in Chinese purchasing power the main driver of their economy is still exports. Higher yuan means fewer exports.
And they have wage pressure at home and that has the Chinese government desperately trying to adjust their market by making workers more satisfied with the yuan they've got. Yet this move could drive inflation at home as Chinese consumers start to look for more goods and property perhaps leading to imbalances in the overall Chinese economy.
For oil the idea that this move would put pressure on the dollar and raise all petroleum prices was thwarted by how demand might respond to higher energy prices. Already demand for oil is struggling. We know consumers are price sensitive and we know that oil is sensitive to the dollar.
Phil can be reached at firstname.lastname@example.org Also make sure to catch him on the the Fox Business Network every day!
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