The U.S. dollar dropped further from highs last seen 20 years ago – a development that benefited risk appetite. At the same time, the Euro and British pound recorded gains. Global stock markets were volatile ahead of the release of the U.S. CPI inflation report. Today, Monday, markets in China, Hong Kong and South Korea are closed due to a holiday.
Global Market News
Asian equities rose and U.S. stock futures remained steady as investors are keeping an eye on the release of the U.S. consumer price index report for further signs that inflation is retreating. The latest moves come after a week of gains for U.S. stocks, and three weeks of losses for the S&P 500 and Nasdaq 100.
Euro, British Pound Sterling Rise; U.S. Dollar Keeps Sliding
The Euro rose to a higher than three-week high against the US dollar and the sterling jumped to a one-month high as European Central Bank officials pointed to further aggressive monetary policy measures. Bundesbank President Joachim Nagel said “further clear steps must follow” if consumer prices don’t start to retreat.
The US dollar dropped to an almost two-week low against a basket of currencies as the release of key U.S. inflation data is nearing. Possible signs of cooling consumer prices could give the Federal Reserve room to slow the pace of its interest rate hikes.
Investors expect the CPI in the U.S. to drop to an 8% from last year while the core CPI that doesn’t include food and energy prices is believed to have risen. Almost all traders expect another large rate hike by the Federal Reserve after two 75 basis point increases.
James Bullard the president of St. Louis Fed Bank has noted that he is “more strongly” inclined toward one more jumbo-sized interest rate hike. Esther George, the president of Kansans City Fed Bank said that the Fed has a “clear-cut” case for continuing monetary policy tightening.
Oil Down as Global Growth Drops
West Texas Intermediate (WTI) plunged toward $86 a barrel over concerns that global demand is decreasing. Global growth is declining, and China is not showing signs of abandoning its zero policy for Covid-19 and its attempts to contain the virus spread by restricting mobility.
What to Watch out for this Week:
U.S. business inventories
U.S. empire manufacturing
U.S. retail sales
U.S. initial jobless claims
U.S. industrial production
China home sales
China retail sales
China industrial production
China fixed assets
China surveyed jobless rate
Euro area CPI
U.S. University of Michigan consumer sentiment