The US dollar is rallying again as we approach the opening of the US session potentially due to the relief from a lower than expected CPI report starting to wear off as well as Federal Reserve members refraining from a dovish tone.
Speeches from Fed members over the past 24 hours confirmed their view that there is no clear indication that inflation will continue to decline. This is, of course, especially true as many assets, such as the energy market, remain volatile.
US futures are indicating that demand for stocks remains steady with three of the major indices up today. Simultaneously, the price of oil is declining, down 1.92% so far having broken out of today's price range.
The stock market may continue to see high demand if crude oil can maintain a price below $85-$90. This would result in further pressure on inflation and monetary policy - both of which are correlated with stocks.
USD/CAD
The Canadian dollar has been strengthening its position this week due to the US Dollar coming under pressure after the release of July inflation figures, and the price of oil soaring. However, over the past few hours the price seems to indicate that the dollar will not go down without a fight.
The US Dollar Index has increased - a phenomenon which can also be seen on the USD/CAD. In addition to this, the price of oil has also slightly declined putting further pressure on the Canadian Dollar. Traders are waiting to see if the price will be able to break higher than yesterday’s retracement which may also entice further trend traders.
The US CPI figures led many investors to believe that major interest rate hikes of 0.75% and 1% will not be actioned again in the coming months.The Federal Reserve will surely not give up on tightening the monetary policy further just yet, because the CPI rate remains unsatisfactory. However, the US central bank may slow down the pace of the interest rate hikes. For example, it may increase the rate by only 50 basis points or even suspend alterations for a while to assess the impact on the economy.
Elsewhere, many investors have questioned why oil prices have increased over the past 2 days. They rose mainly due to strong July data on Chinese exports, which reflected an increase of 18%, and the forecast of the International Energy Agency (IEA) for an increase in energy demand for the current year by 380 thousand barrels per day.
Bitcoin
This week Bitcoin looks like it's on track to end the week slightly higher. The price is slightly lower with a decline measuring 0.75% today, but the weekly performance looks set to be above 2.25% unless a strong decline is witnessed in the coming hours. The total market capitalization increased to $1.134 trillion, and the market share of Bitcoin was just above 40%.
Volatility levels remain low compared to previous weeks and months. This may also be due to uncertainty linked to the industry over the past 2 months after a number of firms have closed their doors and had issues with delays in withdrawals. On the other hand, figures in terms of the total market capitalization have increased which may signal that investors are again returning to the market.