Global overview
Oil’s move to 10-month highs weighed on global shares ahead of tonight’s US inflation report. The market is looking for a rise in headline inflation and a drop in core inflation – these mixed messages might make for a volatile session.
Global sentiment unsettled by oil rally
Global shares were mostly weaker overnight as rising oil prices sparked fears of a potential inflation rebound ahead of tonight’s US CPI numbers.
WTI crude oil climbed 1.8% to USD88.84 per barrel yesterday – the highest level in ten months.
The rocketing oil price unsettled markets ahead of tonight’s all-important US inflation number. The S&P 500 fell 0.6% while the tech-focused Nasdaq fell 1.1%. (A disappointing reaction to Apple’s iPhone 15 announcement also weighed on tech shares overnight.)
The monster rebound in crude oil over the last few months, with oil up 40% from its May lows, has provided little support for commodity currencies, however, with the Australian dollar near nine-month lows versus the US dollar, and the Canadian dollar near six-month lows versus the greenback.
Kiwi eases after Monday’s jump
In other markets, key currencies mostly consolidated after Monday’s big drop in the US dollar and ahead of tonight’s US inflation numbers.
The USD/CNH and USD/SGD were both broadly flat. The NZD/USD eased, down 0.3%, after its large rally on Monday. The NZD/USD might be particularly susceptible to a large move overnight with the kiwi traditionally tied to US interest rate expectations.
Mixed messages from US CPI
US inflation, due at 10.30pm AEST, will be critical for the US dollar’s next move.
While markets expect no change from the Federal Reserve at next week’s meeting, the November meeting is still seen as a 50-50 chance.
Markets are looking for a significant increase in the annualized headline number – from 3.2% in July to 3.6% in August – but the core number is expected to fall from 4.7% in July to 4.3% in August. The market reaction to these mixed messages might be volatile.
FX steady ahead of US CPI
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 11 – 16 September
All times AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
