The US Dollar is on the rise again as we approach the opening of the US trading session. This is potentially due to the effects of lower inflation starting to wear off and the Federal Reserve members refraining from a dovish tone. The speeches of various Fed members over the past 24 hours have confirmed that inflation remains high and that we do not yet have a certain indication if inflation will indeed continue to decline. This is, of course, especially true as many assets, such as the energy market, continue to see high levels of volatility and the employment sector continues to increase with higher wage growth.
Other areas of the market are also showing signs of volatility and reacting to the US Dollar. The stock market futures are indicating that demand for stocks continues to remain steady with all three of the major US indices up today. Simultaneously, the price of oil is declining. Oil prices have broken out of today's price range and declined by 1.92% so far. 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.
The Canadian Dollar has been strengthening its position this week. This is mainly due to the US Dollar coming under pressure after releasing July inflation figures, and the price of oil soaring since it has been correlated to the USD for a number of years. 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.
USD/CAD 30-min price chart on August 12th.
The US Consumer Price Index (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 as inflation rates remain unsatisfactory. However, the regulator may slow down the pace of the interest rate increases. For example, the regulator may increase the rate by only 50 basis points or even suspend alterations for a while to assess the impact on the economy.
Investors will also plan their trades for next week where the asset is likely to be strongly influenced by the Fed’s Meeting Minutes and also the Consumer Price Index for the Canadian 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.
This week Bitcoin looks like it's on track to end the week slightly higher. The price of the asset 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%.
Bitcoin 4-hour price chart on August 12th.
The asset reacted similarly to the stock market, seeing an increase in demand due to the latest inflation figures and a potential alteration to the monetary policy. However, the levels of volatility remain low compared to previous weeks and months. This may also be due to uncertainty specifically 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.
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