Big Overnight Drop in the Price of Oil – Currency Thoughts
Big Overnight Drop in the Price of Oil
May 27, 2026
The news regarding U.S.-Iranian negotiations remains confusingly mixed, but the market’s attention has honed in on an optimistic comment on Iranian state news predicting a return to pre-war shipping traffic through the Strait of Hormuz within a month. In response, the price of WTI crude dived as low as $87.77 (a 40-day trough) and is currently down 4.5% on balance. Prices for gold, silver and Bitcoin are likewise 2.0%, 2.9% and 1.3% below yesterday’s closing levels.
Dollar movements since the end of Tuesday range from drops of 1.1% and 0.7% against the New Zealand kiwi and South Korean won to appreciations of 0.5% versus the Australian dollar, 0.3% vis-a-vis the Indonesian rupiah, and 0.2% relative to the Canadian dollar. Smaller net changes have been made of +0.1% against the yen, zero percent versus sterling and -0.1% relative to the euro.
Ten-year sovereign debt yields have fallen by five basis points in the U.K. and Australia, four basis points in Switzerland, two bps in the United States and Japan and a single basis point in France, Italy and Spain. The German 10-year bund yield is unchanged.
Equity market gains occurred of 2.3% in South Korea, 1.2% in New Zealand and 1.7% in Taiwan but also losses were seen of 1.3% in China and 1.1% in Hong Kong. European and U.S. share prices are mostly higher thus far.
At a scheduled review of New Zealand monetary officials, the RBNZ Board split 3-3 between keeping the central bank’s official cash rate unchanged at 2.25% or hiking such by 25 basis points and gave the benefit of the doubt to the choice of not making a rate change at this time. However, with New Zealand inflation hovering at the target ceiling of 3% on the way to a likely peak next quarter of 4.3% and in light of the hawkish tone of the released statement, investors now attach a fairly likely probability to an interest rate increase as soon as July.
Other central bank guidance overnight came from speeches by Bank of Japan Governor Ueda and the president of the Dallas Federal Reserve District, Lorie Logan. Ueda worries about elevated energy prices becoming persistent and impacting broader measures of price inflation but counter-balanced that concern with a call for caution in deciding when and how much to raise interest rates. Logan said the world may be entering a period of limited availability of oil and natural gas supplies and be forced to seek other sources of energy to accommodate full demand.
Australian consumer price inflation in April was not as elevated as expected, slipping back to a 2-month low of 4.2% overall with trimmed mean and weighted median core readings of 3.4% and 3.5%.
The monthly rise Japanese corporate service prices of 0.5% in April was well below March’s 1.3% upsurge, dampening the 12-month rate of increase to 3.0% from 3.3% in the prior month.
The year-on-year increase of Chinese industrial profits in the first third of 2026, 18.2%, was well above the 0.6% rise in all of 2025.
French consumer confidence in may showed the third straight move lower, falling to a 38-month low of 82 from a 10-month high of 91 back in February before the big jump in energy costs.
Finnish consumer confidence was two index points better in May than April but, at -10.5, remained quite depressed.
The Swiss ZEW expectations index, a gauge of investor confidence in that economy, improved more than anticipated to a reading in May of -11.1 from -30.3 in April and -35.0 in March.
Austria’s manufacturing purchasing managers index was above the 50 neutral threshold in May for a third straight month and at 51.7 a half point higher than in April.
Business confidence in South Korea improved six index points in May to a 45-month high.
An 8.5% decline last week in U.S. mortgage applications was the weakest result in eight weeks and represents the fourth drop in five weeks. The 30-year fixed mortgage rate has climbed to a 9-month low.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Australia CPI, BOJ Governor Ueda, French consumer confidence, Reserve Bank of New Zealand
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