Oil Prices Impacting Forex Markets

While prices within the global Forex market are impacted by several variables, energy prices are a prime factor. Currently, the energy market is spiraling downward thanks to falling crude oil prices. Continued weakness in crude oil prices may soon have a ripple effect on many major currencies used throughout the world.

Crude oil fell three percent in mid-June, officially hitting a ten-month low. This is the fastest oil freefall in the first half of a year since June of 1997. The issue is a simple one: the supply exceeds the current demand. Figuring out a way to limit oil circulation without initiating layoffs is now a top priority for OPEC.

Investors remain wary of OPEC’s grasp on the entire energy industry. Many believe instead of limiting oil output, OPEC should put an immediate freeze on any production. The future of the oil business is on the forefront of many investors’ minds. Experts say the crude oil outlook hasn’t appeared this bleak in more than a decade.

The impact of falling prices is being felt all across the globe. The New Zealand and Australian dollars have been hit the hardest, declining 0.1% and 0.2% respectively. The U.S. dollar index fell .05%, but investors worry about a pause throughout the economy.

The last notable oil price freefall occurred two years ago. More than 100,000 United States’ workers found themselves out of a job as budgets were slashed across the energy industry. The prices fell to levels last seen during the Great Recession in 2009. Although the plummeting prices were concerning at the time, America’s economy remained afloat due to its diverse markets. The United States is less vulnerable than other nations when it comes to falling oil prices, given that it does not rely as heavily on one single entity.

When prices hit a low in 2015, experts predicted average oil prices would float around $70 per barrel in five years. Nearly halfway to that 2020 estimate, the price currently sits at $44.71 per barrel.

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