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US dollar gains over fears of Fed hiking, Wall Street reverses losses

Traders continue to choose US dollar as a safe haven currency after new fears of rate hikes emerged from the inflation report.

Traders move away from risk with today’s data

Following an intraday increase, Treasury rates pulled back and boosted market growth sectors. The S&P 500 increased 0.28%, while the Dow Jones rose 0.11%, and the Nasdaq increased 0.98%.

Apple and Alphabet led the tech sector with respective gains of 1.33% and 2.39%. The US dollar maintained its strength, however, the currency weakened ahead of Wall Street’s closing bell. Equities rebounded from intraday lows.

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The US dollar gained from heightened risk aversion caused by the Federal Reserve’s sustained monetary tightening hints. This was sparked by US inflation dropping marginally in January. Expectations for a Fed turnaround to dovish diminished.

The United States released retail sales for January, which increased by 3% month-over-month. The number gave the dollar extra fuel and put equity markets on the defensive.

The UK stated earlier in the day that the annual CPI climbed by 10.1% in January, down from 10.5% in December, while the annual core CPI rose by 5.8%, down from 6.2% before. This actually signals the hiking in the UK may slow down. GBP/USD has decreased to 1.2020.

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European statistics fell short of forecasts, building a selling stress on the Euro. In December, Industrial Production fell 1.7% year-over-year, while the Trade Balance registered a €18.1 billion deficit. EUR/USD hit a low of 1.0660 and is currently at the 1.0680 range.

The AUD/USD dipped to 0.6864 but regained the 0.6900 level before to the market’s end as equities rose. Thursday morning will provide employment numbers and inflation forecasts for Australia.

USD/CAD is trading at 1.3390, with the Canadian currency appreciating due to a rebound in crude oil prices.  The Energy Information Administration (EIA) revealed that US crude stocks increased by 16 million barrels last week in the fourth biggest build.

Oil enjoys another volatile day

On Wednesday, oil prices nearly recovered from an earlier 2% decline after the EIA data. WTI, the benchmark crude oil for the United States, has fallen for three consecutive days. WTI now trades at $78.59, down 0.60%.

Fears of additional rate hikes by the Fed strengthened the US dollar, acting as a brake for oil prices. Brent crude for delivery in April closed at $85.29 a barrel, a decrease of 29 cents, or 0.34%. The intraday minimum value was $83.91.


US crude stockpile chart, source: Energy Information Administration

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.


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