The U.S. dollar displayed little volatility on Wednesday, with the dollar index (USDX) ending the session 0.19% higher, right below the 104.8 mark. Price action remains subdued despite CPI data indicating a rise in U.S. inflation, as investors brace for a crucial European Central Bank policy meeting on Thursday.
A potential rate hike in this ECB meeting would result in record level interest rates, however, a pause is also very likely as eurozone’s economy deteriorates. The central bank has raised rates in all its meetings this year and another increase of 25 basis points would reach the rate to 4%, the highest level since the euro was launched in 1999. President Christine Lagarde gave clues of a possible pause this month at her press conference following the last meeting in late July, but Reuters reported on Tuesday that the central bank was set to raise its forecast for inflation next year to more than 3%, seemingly increasing the chances of a hike.
Following an increase in US inventories reported by the EIA on Wednesday, energy prices painted a mixed picture with WTI down by 0.13% while Brent gained by 0.28% for the day. During Wednesday’s session, both oil benchmarks touched 10-month highs as support from a positive demand outlook remains strong and as Saudi Arabia and Russia are extending their output cuts to the end of 2023.
Wall street had quite the positive session yesterday, with all the main US stock indices closing in the green and specifically, the US 500 was up by 1.29%, the US tech 100 rose by a sharp 1.76%, and the US 30 added 0.79% to its value. Part of the move could be attributed to the fact that a positive inflation reading reinforced market expectations that the Federal Reserve will likely keep interest rates unchanged in September.
The majority of megacap stocks saw some sharp gains on the iFOREX platform, some of which are Tesla (+1.46%), Meta Platforms (+1.12%), Microsoft (+1.30%), and Amazon (+2.63). Apple was an exception as its share price declined for a second day in a row, posting losses of 1.22%, after unveiling new iPhones without altering their pricing.
Investors are now looking ahead to upcoming ECB interest rate decision and press conference later in the day, while a significant batch of economic releases is also due from the U.S., including news such as PPI, Retail Sales and Unemployment Claims.