Dollar and Oil Prices Stalemate Awaits New Catalysts
The US dollar and crude oil prices have hit a stalemate, awaiting new catalysts to break through their current ranges. The US Dollar Index declined after the Producer Price Index (PPI) data came in below expectations, but most of the policy repricing was already completed when the July non-farm payrolls and Consumer Price Index (CPI) data were released.
The market-implied probability of the Federal Reserve keeping interest rates unchanged in September has risen from approximately 45% to nearly 70%, according to federal funds rate futures. However, the reaction of the US dollar was surprisingly muted, with it being the second-weakest performing currency among the G10 on Thursday.
The crude oil market is also at a crossroads, with Brent crude stalled near the psychological threshold of $90 per barrel. The stalemate in US-Iran tensions is no longer new information, and the bearish signal of U.S. crude inventories recording their largest weekly increase since February (9.1 million barrels) is returning to market focus.
The US dollar requires new data catalysts to initiate its next leg down, while Brent crude needs a substantive escalation to break through current resistance. Both assets are awaiting the next decisive signal, with August employment and inflation data serving as key validations ahead of the FOMC meeting on September 15-16.