The US dollar was little changed against world currencies on Wednesday, as investors digested weak inflation figures ahead of the July FOMC meeting minutes. Meanwhile, oil prices resumed their downtrend ahead of the US Energy Information Administration’s weekly inventory report.
The dollar index, which tracks the performance of the dollar against six global currencies, held steady at 97.02 on Wednesday. The dollar index gained around 0.2% on Tuesday after upbeat housing data.
Trade volumes were relatively low in the early New York session. The EUR/USD held steady at 1.1031 after trading within a narrow range of 1.1015-1.1076. The GBP/USD was also unchanged at 1.5652, having traded within a daily range of 1.5647-1.5697.
The greenback advanced against its northern rival, the Canadian dollar, climbing 0.2% to 1.3083 CAD.
In economic data, US inflation slowed more than expected in July following back-to-back months of slightly faster growth. The consumer price index (CPI) rose 0.1% in July compared with 0.3% the prior month, the Labor Department reported on Wednesday. Economists forecast a monthly increase of 0.2%.
In annualized terms, the July CPI rate was 0.2%, matching forecasts and higher than June’s 0.1%.
So-called core inflation, which strips away food and energy, also rose 0.1% from the previous month. In annualized terms, core CPI was 1.8%, official data showed.
Investors remained on the sidelines for most of the day in anticipation of the Federal Open Market Committee (FOMC) policy meetings, which could shed light on the central bank’s intentions regarding interest rates. However, given that the July meetings occurred well before China’s unexpected devaluation of the yuan, the minutes should be taken with a grain of salt. Analysts speculate that China’s currency devaluation could deter the Fed from raising interest rates until later than previously forecast.
In commodities, oil prices resumed their downtrend on Wednesday after rebounding slightly the previous day. US crude futures slumped 30 cents or 0.7% to $42.32 a barrel on the New York Mercantile Exchange.
Brent crude, the global benchmark, tumbled 9 cents or 0.2% to $48.72 a barrel on the ICE Futures Exchange in London.
The Energy Information Administration on Wednesday is expected to show another drop in US commercial crude inventories last week, which could ease pressure on crude prices. However, market sentiment remains overwhelmingly bearish as global supply continues to outpace demand by a wide margin.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.