The U.S. dollar fluctuated between gains and losses on Tuesday, with the dollar index (USDX) finally ending the session almost unchanged, close to the 104.5 mark. Price action remains subdued as investors brace for key U.S. inflation data later in the day that could shed some light to the country’s inflation outlook and the Fed’s next monetary policy steps. Currently the greenback is trading near six-month highs, despite signs that the Fed will most likely not hike rates in September, since it is still unclear how it will act in the following months to the end of the year.
Reports from the U.K. early on Wednesday showed that the U.K. economy contracted by 0.5% in July, industrial production fell 0.7% and manufacturing output dropped 0.8%, ahead of the Bank of England’s upcoming policy meeting next week. The BOE is widely expected to raise interest rates to 5.5% from 5.25%.
Energy prices jumped on Tuesday, with WTI up by 1.75% and Brent gaining by 1.44% for the day. Prices seem to have gained significant support by the EIA and OPEC reports which signalled a bullish demand outlook for the energy market. OPEC said that oil markets will tighten further this year amid robust demand and lower production and on top of that, the Energy Information Administration said global oil inventories were expected to fall by almost a half million barrels per day in the second half of 2023.
A minor correction was observed in the main US stock indices on Tuesday, with the US 500 down by 0.45%, the US tech 100 dropping by 0.97%, and the US 30 almost unchanged. Part of the move could be attributed to a sharp decline in Oracle shares after rising energy prices deepened worries about persistent price pressures ahead of crucial inflation readings this week. Cloud-computing heavyweights Amazon.com and Microsoft also declined, pressured by Oracle's weak forecast and by a rise in U.S. Treasury yields.
Investors are now looking ahead to upcoming inflation data later in the day, with core CPI expected to fall to 4.3% growth on an annual basis. Other reports due include eurozone's industrial production report, federal budget balance and crude oil inventories.
US 500
U.S. stocks were lower after the close on Tuesday, as losses in the Technology, Consumer Goods and Consumer services sectors led shares lower. At the close in NYSE, US 500 and US Tech 100 lost 0.45% and 0.97% respectively while US 30 lost 0.01%.
Apple dropped 1.8% after unveiling new iPhones, while it did not increasing prices as it faces a global smartphone slump. Oracle shares dived to their lowest since June after the cloud-services provider forecast current-quarter revenue below targets and narrowly missed first-quarter expectations.
Market Participants are now waiting for the August consumer price index data due on Wednesday and producer prices reading scheduled for Thursday to gauge the outlook for U.S. interest rates ahead of the Fed's meeting on September 20th.