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Market Update

Oil falls amid Russian oil price cap discussions

September 6, 2022


Interest rate expectations continue to increase along with U.S. dollar strength, while oil falls as the West decides to impose a price cap on Russian oil.

Interest rates and economic data

Following a general upward trend in swap rates last week, USD interest rate expectations fell on the back of the Nonfarm Payrolls report released Friday morning. Nonfarm Payrolls and the unemployment rate both reported higher than consensus (+315,000 versus +298,000 and 3.7% versus 3.5% respectively). However, the rise in the unemployment rate compared to the previous month was partially due to a 786,000 increase in the civilian labor force. On the other hand, average hourly earnings month-over-month and year-over-year were both down versus Bloomberg expectations (+0.3% versus +0.4% and +5.2% versus +5.3% respectively).

According to Capital Economics senior U.S. economist Michael Pearce, “The slower pace of payroll gains in August, together with the big rebound in the labor force and the more modest increase in wages, would seem to favor a smaller 50bp rate hike from the Fed next month, rather than a 75bp increase, but officials will put a lot more weight on August’s CPI data, due the week after next." At market close for the week, the Bloomberg interest rate probability forecast was 256% for the September meeting, implying the market is torn between expecting a 50bp and 75bp hike.

USD strength trend continues

Overall, the USD continued to strengthen throughout the week, with the Bloomberg USD Spot Index increasing by 1.16% from the start of the week to the peak, before falling slightly following Nonfarm Payroll numbers. Notably, EUR/USD crossed parity (1$ = 1€) several times during the week, and GBP/USD fell below 1.1600, its lowest level since March 2020. USD strengthening throughout 2022 has put pressure on corporates with foreign currency earnings. In a discussion with The Wall Street Journal, Amol Dhargalkar, Chairman and Global Head of Corporates at Chatham Financial, shares strategies corporate treasurers can employ to manage foreign currency risk in light of the strong U.S. dollar.

Oil prices fall as the West agrees to cap the price of Russian oil

Oil prices fell overall last week with West Texas peaking at $97.30 on Tuesday and the index trading at $88.00 at the time of writing. Notably, on Friday the largest economies in the West (UK, Japan, Canada, Germany, France, Italy, and the U.S.) agreed to apply a price cap on Russian oil in an attempt to reduce Russia’s ability to continue to fund its war in Ukraine. The cap level will be decided in future talks with all participants, including non-G7 countries. In retaliation, Russia has already threatened to ban oil exports to countries that implement such a cap.

(Related insight: Read, "5 lies corporates tell themselves about commodity risk")

Looking ahead

Over the next week, the market will focus on MBA Mortgage Applications, Trade Balance, and Initial Jobless Claims data releases, with CPI and PPI data to be released the following week.

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About the author

  • James Mallon


    Corporates | Kennett Square, PA

    James is an analyst on Chatham’s Corporates Sector, specializing in foreign currency, interest rate, and commodity hedging analytics and strategy.


Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit

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