Brent crude climbed more than $10 last week, driving the dollar higher and energy stocks lower. Orbex strategist David Kindley explains the impact on currencies and equities.
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Brent crude climbed more than $10 last week, the biggest weekly gain in months. The dollar rallied on the move. Risk appetite faded, pushing the DXY higher. The S&P 500 fell, led by sectors that would face higher input costs.
Orbex market strategist David Kindley said the dollar's advance reflects a shift out of equities into cash and short-term Treasuries, not a change in Fed rate expectations. The equity selloff accelerated late Friday, partly due to month-end rebalancing, traders said.
The dollar's strength hit currencies tied to commodity imports hardest. The yen weakened past 160 per dollar, a level that held despite the Bank of Japan's rate hike last week (Dollar Holds above JPY 160 after BOJ Hike). The Aussie dollar rose after the RBA held rates. The broader risk-off mood capped the gain.
Within energy equities, the reaction was split. Upstream producers gained with the spot price. Refiners and airlines lost ground on margin concerns. Traders said the divergence suggests the market is treating the Brent spike as a supply shock, not a demand-driven rally.
The weekly U.S. crude inventory report is due Wednesday. A drawdown would reinforce the supply narrative.
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