Crude oil rallied to 87.15, the highest level since October 2009, as driven by strong economic data in the US. However, profit-taking emerged and dragged price lower to 86.19, up +0.05%, at close.
Oil price initially shrugged off worries including Chinese tightening which might dampen demand and difficulties Greece faces in implementing austerity measures as ISM manufacturing data soared 0.8 points to 60.4 in April. The market had anticipated a milder improvement to 59.8. Given the strong correlation between ISM readings and US GDP, the former reaching a 6-year high signals the growth will probably be robust in the second quarter. March personal income and spending report was also strong. Personal spending increased +0.5% m/m (inflation adjusted). However, personal disposable income only rose +0.2% m/m in March.
Oil spill off the US Gulf Coast also supported prices but the impact is diminished as a spokeswoman for the port said on Monday that shipping operations at the Louisiana Offshore Oil Port were normal despite the offshore oil spill.
Gold price grinded higher yesterday despite weakness in the euro. The benchmark contract rose to as high as 1188.4 before settling at 1183.3, up +0.22%. Although the EU, the IMF and Greece eventually agreed on a deal worth 110B euro in an attempt to remedy sovereign crisis, investors remained worried about the issue. This was shown in the EURUSD's decline of -0.9% yesterday. Strength in gold and USD indicated investors remained cautious and preferred to invest in safe assets.
The RBA has just announced to raise the cash rate by +25bps to 4.5% as economic growth is strong in Australia. In the accompanying statement, Governor Glenn Steven said that growth is expected to be 'at trend pace or a little above in 2010' and the board will continue to 'assess prospects for demand and inflation, and set monetary policy as needed to achieve an average inflation rate of 2-3 per cent over time'.