Commodities Week Ahead: 6-Week Oil Rally Casts Shadow Over Upcoming Inflation Data
The United States and China both have key inflation data this week, with oil bulls looking for a relatively positive outcome on both sides to extend a six-week rally already looking heavy for crude.
On Thursday, the United States is to release its July reading for the Consumer Price Index, which will show if markets are correct in believing that the Federal Reserve is close to ending its aggressive cycle of interest rate hikes.
The CPI, which expanded 3.0% year-on-year in June for the smallest growth in two years, is expected to have seen a slightly more aggressive expansion of 3.3% in July.
A day before the CPI release, the US will issue its July Producer Price Index data, with core producer prices expected to rise by 2.3% from a year earlier.
The Fed, hoping to bring inflation back to the pre-pandemic level of 2%, has embarked on a year-and-half of monetary tightening that has seen it pile an additional 525 basis points of rates on top of a previous level of just 25.
A lower CPI reading would make Fed policymakers more likely to hold off raising interest rates at their upcoming September meeting after a quarter-percentage-point hike last month.
The Fed’s next rate decision is on Sept. 20, and it has identified runaway jobs growth and correspondingly higher wages as among the reasons for inflation hitting 40-year highs of more than 9% a year in June 2022.
While June’s growth in US jobs was encouragingly smaller compared with May’s expansion of 306,000, wages were still higher than what the central bank desired.
Also, the rally in oil could be a new problem for the Fed if it continues, especially with crude prices having gained almost 20% over the past month and a half.
Crude prices edged down in Asian trade on
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