Equity markets were marked lower last week on the back of continued geopolitical tension in the middle east. Yet by Friday the Dow Jones was showing signs of already having bottomed, and the US dollar was consolidating after failing to go on with the usual safe haven rally.

Oil prices were always expected to be strong now and through the year, so the recent rally is likely to be continued. Indeed the price action suggests a continuation pattern rather than a top. We are likely to see further strong gains in the oil price as a symptom of strong global growth and increased demand says Clifford Bennett of Herston Economics. The recent crisis in the middle east is to Bennett a mere catalyst rather than the fundamental cause of the rally in oil. Subsequently on the basis of strong global growth equity markets, commodities, the Australian dollar and the Euro can all be expected to resume their major up-trend this week.

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Clifford Bennett
Herston Economics
Email: clifford@herstoneconomics.com

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