WTI recovers quickly as expectations of PBoC's dovish stance outperform Fed's hawkish guidance

• The oil price has recovered sharply after slipping below $71.00 ahead of PBoC’s interest rate policy.
• Hawkish Fed guidance failed to impact overall oil price recovery.
• Investors will keep an eye on the discussion between US Secretary of State Antony Blinken and China’s President XI Jinping.

West Texas Intermediate (WTI), futures on NYMEX, have reported a quick recovery after correcting below $71.00 in the European session. The oil price is capitalizing on expectations of a dovish stance from the People’s Bank of China (PBoC), which will be announced on Tuesday, as the Chinese economy needs monetary stimulus to support bleak demand from households.

Inflationary pressures in China are critically soft and firms are not getting demand for their output, which indicates weak economic recovery. After a scrutiny of current economic prospects, giant investment banking firm Goldman Sachs has cut its outlook for Q2 Gross Domestic Product (GDP) growth to 1.0% from the prior forecast of 4.9%. The investment banking firm is anticipating an improvement in the second half of the year if monetary policy remains supportive.

Meanwhile, investors are ignoring hawkish interest rate guidance from the Federal Reserve (Fed). Fed chair Jerome Powell, in June’s monetary policy statement, confirmed that two interest rate hikes are appropriate this year. However, investors are hoping that the Fed will hike only once.

Going forward, investors will keep an eye on discussions between US Secretary of State Antony Blinken and China’s President XI Jinping.

The US Dollar Index (DXY) is inside the woods amid an absence of potential economic indicators this week. The upside in the USD Index seems restricted as US short-term consumer inflation expectations have decelerated to 3.3% at an annualized rate over the next year, down from the expectations of 4.2% released in May