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Archives: Reuters Articles

European shares bounce back ahead of inflation data

European shares bounce back ahead of inflation data

Aug 31 (Reuters) – European shares edged higher on Wednesday, supported by strong performances in tech stocks following a three-day selloff, with focus on regional inflation figures due later in the session.

The continent-wide STOXX 600 was up 0.4%, snapping three consecutive days of losses. But the index was set for a monthly loss of nearly 4%.

Rate-sensitive tech stocks, down for three straight days on expectations of aggressive interest rate hikes globally, climbed 2.1%.

Among stocks, Italian luxury group Brunello Cucinelli fell 3.9% after posting its half-year results.

Dormakaba Holding slipped 2% after the Swiss security group forecast organic growth slightly above its target range, but added that the outlook applied only to the first half of the 2022/23 financial year.

Gains were also capped as Russia began halting gas flow via a major pipeline to the continent’s largest economy on Wednesday.

Focus in now on euro zone inflation reading for August due at 0900 GMT.

(Reporting by Anisha Sircar in Bengaluru; Editing by Sherry Jacob-Phillips)

Gold set for fifth monthly fall as investors brace for more US rate hikes

Gold set for fifth monthly fall as investors brace for more US rate hikes

Aug 31 (Reuters) – Gold prices were set on Wednesday for a fifth straight monthly drop, as solid US economic data and hawkish Federal Reserve comments pointed to more interest rate increases, denting the non-yielding metal’s appeal.

Spot gold  fell 0.1% to USD 1,721.59 per ounce, having hit its lowest level since July 27 at USD 1,718.70 earlier in the session. Bullion has lost 2.5% so far in August.

US gold futures dipped 0.2% to USD 1,733.10.

“The Fed does not have intentions to significantly ease in the near term. Their focus is on inflation and what they want to do is perhaps even create some two-way risks around policy expectations where they’re giving a bit less explicit forward guidance,” said Ilya Spivak, a currency strategist at DailyFX.

This contributes to gold’s weakness and the US dollar’s strength, Spivak added.

New York Fed chief John Williams said on Tuesday the US central bank will be likely to need to get its policy rate “somewhat above” 3.5% and keep it there through the end of 2023.

Even though gold is seen as a hedge against inflation, rate hikes raise the opportunity cost of holding bullion while boosting the dollar.

Latest data showing US job openings increased in July and a bigger-than-expected rebound in consumer confidence in August bolstered expectations that the Fed will maintain its aggressive policy stance.

The dollar index  steadied close to a two-decade peak reached on Monday.

A number of European Central Bank policymakers have also called for swift rate rises.

Spot gold may test a support at USD  1,710 per ounce, a break below which could open the way towards USD  1,680-USD 1,698 range, according to Reuters technical analyst Wang Tao.

Spot silver fell 0.7% to USD  18.37 per ounce and was down more than 9% for August, its biggest monthly drop since September 2020.

Platinum was flat at USD 847.45, but was headed for a more than 5% drop for the month. Palladium gained 1.6% to USD 2,121.27 per ounce.

(Reporting by Eileen Soreng in Bengaluru; Editing by Subhranshu Sahu, Sherry Jacob-Phillips and Jane Merriman)

Rate hike bets buoy euro and bolster US dollar

Rate hike bets buoy euro and bolster US dollar

SINGAPORE, Aug 31 (Reuters) – The dollar was firm on Wednesday as stronger-than-expected US economic data and hawkish Federal Reserve comments pointed to higher interest rates, while rate-hike bets in Europe also have the common currency clinging on above parity.

German inflation running at its highest in nearly 50 years and a growing chorus of European Central Bank officials calling for big rate hikes has markets pricing a better-than-even chance of a 75 basis point (bps) rate hike next week.

The euro rose 0.16% to USD 1.0032 in the Asia trade, which if sustained would make for a third session of gains in a row, though it is still nearly 2% down for the month. Eurozone inflation data is due at 0900 GMT.

“The story in Europe is really not any better. The only thing that is kind of holding the euro just around parity is this hawkish rhetoric coming from ECB speakers,” said Rodrigo Catril, a currency strategist at National Australia Bank.

“The inflation numbers we got from Germany are kind of setting expectations for a strong number as well coming for the euro zone today.”

The US dollar index, which measures the greenback against a basket of currencies, hovered at 108.64, just below a two-decade peak of 109.48 made on Monday. It has climbed about 2.7% for the month, and is on track for a third straight month of gains.

Meanwhile, sterling GBP gained 0.21% to USD 1.1679, after hitting a fresh 2-1/2-year low of USD 1.1622 overnight. The sliding yen JPY steadied at 138.61 per dollar.

Chinese data out on Wednesday showed that factory activity in the world’s second-largest economy contracted again in August, as new COVID infections, the worst heatwaves in decades and a property sector crisis weighed on production.

Commodity currencies such as the Aussie were little fazed by the weak China data, however, having been battered by a strong US dollar overnight. The Australian dollar was up 0.31% to USD 0.68755, though that is after a 0.7% overnight fall.

The kiwi was up 0.19% to USD 0.6140, after having slid 0.43% overnight.

Likewise, the Chinese offshore yuan was kept under pressure at 6.9029 per dollar .

All eyes remain on the US nonfarm payrolls data due on Friday, with a robust job openings data released overnight potentially foreshadowing a strong showing at the end of the week, making the case for more aggressive rate hikes.

New York Fed chief John Williams told the Wall Street Journal that it will “take some time” before interest rates would be cut, while Atlanta Fed President Raphael Bostic said: “I don’t think we are done tightening.”

Traders are now pricing in about a 72.5% chance of a 75 bps Fed funds rate hike next month.

Cryptocurrencies were staging a rebound on Wednesday, with Bitcoin up 2.86% to USD 20,385, and Ether, the coin linked to the ethereum blockchain network, up 5.45% to USD 1,606.3.

(Reporting by Rae Wee; Editing by Sam Holmes and Kim Coghill)

 

 

Oil crawls back up on signs of firm US fuel demand, weaker dollar

Oil crawls back up on signs of firm US fuel demand, weaker dollar

MELBOURNE, Aug 31 (Reuters) – Oil prices recovered slightly on Wednesday as data pointed to firm fuel demand in the United States, providing respite after a 5% drop a day earlier on fear of demand suffering from increased China COVID-19 curbs and central bank interest rate hikes.

A slightly weaker US dollar also shored up the market, with oil consequently being cheaper for buyers holding other currencies.

US West Texas Intermediate (WTI) crude futures jumped 90 cents, or 1%, to USD 92.54 a barrel at 0306 GMT, after sliding USD 5.37 in the previous session driven by recession fears.

Brent crude futures for October, due to expire on Wednesday, climbed 70 cents, or 0.7%, to USD 100.01 a barrel, trimming Tuesday’s USD 5.78 loss. The more active November contract was up 96 cents, or 1%, at USD 98.80 a barrel.

The price swings since the Ukraine conflict began six months ago have rattled hedge funds and speculators and thinned trading, which in turn has made the market whipsaw even more, as seen on Tuesday.

“I can’t stress, the low liquidity means we’re in for some volatile moves,” said Commonwealth Bank commodities analyst Vivek Dhar.

Supporting market sentiment on Wednesday, data from the American Petroleum Institute (API) showed gasoline inventories fell by about 3.4 million barrels, while distillate stocks, which include diesel and jet fuel, fell by about 1.7 million barrels for the week ended Aug. 26.

The drawdown in gasoline stockpiles was nearly triple the 1.2 million barrel drop that eight analysts polled by Reuters had expected on average. For distillate inventories they had expected a drop of about 1 million barrels.

However, API data showed crude stocks rose by about 593,000 barrels, against analysts’ estimates of a drop of around 1.5 million barrels.

Price gains were capped by worries that some of China’s biggest cities – from Shenzhen to Dalian – are imposing lockdowns and business closures to curb COVID-19 at a time when the world’s second-biggest economy is already experiencing weak growth.

“Worsening outbreaks of COVID-19 in China are also impacting sentiment,” ANZ Research analysts said in a note.

On the supply side, oil exports from Iraq were unaffected by the worst violence seen in Baghdad for years, three sources told Reuters on Tuesday. Clashes eased on Tuesday after powerful cleric Moqtada al-Sadr ordered his followers to end their protests.

The main factor supporting prices at the moment is talk from members of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, that they might cut output to stabilize the market. OPEC+ is next due to meet on Sept. 5.

“They’ll jawbone,” Dhar said. “They’ll try and flag that futures prices don’t reflect true tightness. But to get everyone to agree to cut output is another challenge.”

(Reporting by Sonali Paul in Melbourne; Editing by Christopher Cushing)

 

Oil prices fall on recession fears

Oil prices fall on recession fears

LONDON, Aug 31 (Reuters) – Oil prices continued to slide on Wednesday on investor worries about the ailing state of the global economy, the prospect of key central bank interest rate hikes, and increased restrictions to curb COVID-19 in China.

US West Texas Intermediate (WTI) crude futures were down USD 1.34, or 1.46%, at USD 90.30 a barrel, after sliding USD 5.37 in the previous session on recession fears.

Brent crude futures for October, due to expire on Wednesday, were down USD 1.79 at USD 97.52 a barrel following Tuesday’s USD 5.78 loss. The more active November contract was down USD 1.40, or 1.43%, at USD 96.44 a barrel.

The price swings since the Ukraine conflict began six months ago have rattled hedge funds and speculators and thinned trading, which in turn has made the market whipsaw even more, as seen on Tuesday.

“The latest signs of stuttering growth are contracting Chinese factory activity in August and the slower-than-expected expansion of the country’s service sector,” Tamas Varga, analyst at PVM Oil Associates, said.

“Additionally, both the Fed and the ECB are thought to hike interest rates significantly next month, probably by as much as 0.75% – and all these make equity investors run for the exit. Oil duly follows, at least for the time being.”

China’s factory activity extended declines in August as new COVID infections, the worst heatwaves in decades and an embattled property sector weighed on production, suggesting the economy will struggle to sustain momentum.

Some of China’s biggest cities from Shenzhen to Dalian are imposing lockdowns and business closures to curb COVID-19 outbreaks at a time when the world’s second-biggest economy is already experiencing weak growth.

Some bullish factors provided a floor to prices. Data from the American Petroleum Institute (API) showed gasoline inventories fell by about 3.4 million barrels, while distillate stocks, which include diesel and jet fuel, fell by about 1.7 million barrels for the week ended Aug. 26.

The drawdown in gasoline stockpiles was nearly triple the 1.2 million barrel drop that eight analysts polled by Reuters had expected on average. For distillate inventories they had expected a drop of about 1 million barrels.

However, API data showed crude stocks rose by about 593,000 barrels, against analysts’ estimates of a drop of around 1.5 million barrels.

Another factor supporting prices is talk of output cuts by members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+. OPEC+ is next due to meet on Sept. 5.

Russian action on natural gas lent further support. Gazprom halted natural gas flows through Europe’s key supply route on Wednesday as the economic battle intensified between Moscow and Brussels.

(Reporting by Julia Payne in London, Mohi Narayan in New Delhi and Sonali Paul in Melbourne; Editing by Christopher Cushing, Kenneth Maxwell, Kim Coghill and Jan Harvey)

UPDATE 10-Oil prices slump again, hit by demand concerns

U.S. crude, gasoline stockpiles fall – EIA

China factory data disappoints

OPEC+ looks at output cut

Updates to settle, new quotes, recasts

By David Gaffen

NEW YORK, Aug 31 (Reuters) – Oil prices extended their slide on Wednesday, led lower by worries that the global economy would slow further with renewed restrictions to curb COVID-19 in China.

Brent crude LCOc1 futures for October due to expire on Wednesday, settled at $96.49, down $2.82 a barrel, or 2.8%. The more active November contract LCOc2 lost $2.20 to $95.64 a barrel. U.S. West Texas Intermediate (WTI) crude CLc1 futures ended down $2.09, or 2.3%, at $89.55 a barrel.

“The weakness coming out of China has played a significant role” in lowering prices, said Harry Altham, energy analyst for EMEA & Asia at StoneX Group in London. “There are fears of demand destruction across the West as interest rates rise and inflation concerns grip Western economies.”

The market has been primarily concerned with inadequate supply in the months following Russia’s invasion of Ukraine and as OPEC struggled to increase output. That drove near-term contracts to a sharp premium over later-dated futures earlier this year, but that pattern has reversed somewhat as output has increased.

Both OPEC and the United States saw production hit its highest levels since the early days of the coronavirus pandemic, with OPEC’s output hitting 29.6 million barrels per day (bpd) in the most recent month, according to a Reuters survey, while U.S. output rose to 11.82 million bpd in June. Both are at their highest levels since April 2020. nL8N3072WW

“The fear that there’s a slowdown here and then also the potential here for some additional supply increases coming down the pike is having some pressure on the market,” said Mike Sabo, market strategist at RJO Futures in Chicago.

The Joint Technical Committee of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, said it now sees an oil surplus this year of 400,000 bpd, up 100,000 bpd from its forecast a month earlier. nL1N3070O4

Some OPEC+ members have called for cuts. The group is next due to meet on Sept. 5 amid weakening demand in Asia that spurred Saudi Arabia to lower its official selling prices to that region.

U.S. crude stocks fell by 3.3 million barrels, the U.S. Energy Information Administration said Wednesday, while gasoline stocks were down 1.2 million barrels. EIA/S

China’s factory activity extended declines in August due to new COVID infections, the worst heat wave in decades and an embattled property sector that weighed on production, suggesting the economy will struggle to sustain momentum. nL1N30702O

Parts of China’s southern city of Guangzhou imposed COVID curbs on Wednesday, joining the tech hub of Shenzhen in battling flare-ups.nL1N307085

(Reporting by David Gaffen in New York; additional reporting by Julia Payne in London; editing by Jonathan Oatis)

Asia continues global stock slump as Fed tightening fears flare

Asia continues global stock slump as Fed tightening fears flare

TOKYO, Aug 31 (Reuters) – Asian markets extended the global stocks selloff on Wednesday, as investor worries about aggressive monetary tightening were inflamed further by strong US jobs data.

The overnight JOLTS report on job openings – closely watched by the Federal Reserve – pointed to extremely tight labour conditions, defying the Fed’s tightening efforts so far and bolstering the case to do more.

To discourage speculation about rate reductions next year, New York Fed President John Williams said on Tuesday that the central bank likely needed to get the policy rate above 3.5%, and was unlikely to cut rates at all in 2023.

“The strong JOLTS data and Fed rhetoric was the overwhelming narrative,” knocking stocks further and pushing up bond yields, Tapas Strickland, an analyst at National Australia Bank, wrote in a note to clients.

“Financial conditions are a key transmission mechanism for monetary policy, and equities are part of that.”

Japan’s Nikkei sagged 0.6%, while Australia’s share benchmark slid 0.4% and South Korea’s Kospi lost 0.5%.

Chinese blue chips retreated 0.5%. Hong Kong’s Hang Seng slumped 1.8%, with its tech shares tumbling 2.5%.

MSCI’s broadest index of Asia-Pacific stocks declined 0.7%. Its world equity index slumped 0.9% on Tuesday, for a third straight day of losses.

US equity futures though pointed to some respite, with S&P 500 e-minis indicating a 0.3% rebound from the index’s 1.1% slide on Tuesday.

Investors will now be even more attentive to the monthly US jobs report on Friday.

Earlier on Tuesday, data showed German inflation rose to its highest in almost 50 years in August, strengthening the case for the European Central Bank to also go for a super-sized rate hike next month.

Money markets currently place 68.5% odds of a 75 basis-point increase by the Fed on Sept. 21.

The two-year US Treasury yield, which is relatively more sensitive to the monetary policy outlook, hit a fresh 15-year high at 3.497% overnight, but eased back to 3.4558% in Tokyo trading.

The 10-year Treasury yield, which hit a two-month high of 3.153% on Tuesday, stood at 3.1137%.

The dollar index, which measures the currency against six major peers, softened slightly to 108.69, after starting the week by marking a new two-decade high at 109.48.

Gold was little changed at USD 1,723.62, hovering near a one-month low of USD 1,719.56, set Monday.

Crude oil rebounded from declines of more than USD 5 overnight, as industry data showed US fuel stocks fell more than expected.

US West Texas Intermediate (WTI) crude futures rose 64 cents to USD 92.28 a barrel in early Asian trading, after sliding USD 5.37 in the previous session driven by recession fears.

Brent crude futures climbed 48 cents, or 0.5%, to USD 99.79 a barrel, trimming Tuesday’s USD 5.78 loss.

(Reporting by Kevin Buckland)

 

 

Wall Street closes down for 3rd straight session on Fed rate hike worry

Wall Street closes down for 3rd straight session on Fed rate hike worry

NEW YORK, Aug 30 (Reuters) – US stocks closed lower for a third straight session on Tuesday as a rise in job openings fueled fears the US Federal Reserve has another reason to maintain its aggressive path of interest rate hikes to combat inflation.

The benchmark S&P 500 index has tumbled more than 5% since Fed Chair Jerome Powell on Friday reaffirmed the central bank’s determination to raise interest rates even in the face of a slowing economy.

Labor demand showed no signs of cooling as US job openings rose to 11.239 million in July and the prior month was revised sharply higher. A separate report showed consumer confidence rebounded strongly in August after three straight monthly declines.

“They have to weaken the labor market and how are they going to do that – they are going to jam rates and make things so expensive that people are going to pull back, demand is going to fall off, and people are going to get laid off,” said Ken Polcari, managing partner at Kace Capital Advisors in Boca Raton, Florida.

“It locks them in even further.”

The data increases the focus on the August non-farm payrolls data due on Friday.

The Dow Jones Industrial Average .DJI fell 308.12 points, or 0.96%, to 31,790.87, the S&P 500 lost 44.45 points, or 1.10%, to 3,986.16 and the Nasdaq Composite dropped 134.53 points, or 1.12%, to 11,883.14.

New York Fed President John Williams said on Tuesday the central bank will likely need to get its policy rate about 3.5% and is unlikely to cut interest rates at all next year as it fights inflation.

However, Atlanta Fed President Raphael Bostic said in an essay published on Tuesday the Fed could “dial back” from its recent string of 75 basis point hikes if new data shows inflation is “clearly” slowing. Richmond Fed President Thomas Barkin said the Fed’s pledge to bring inflation down to its 2% goal will not necessarily result in a severe recession.

Traders are pricing in a 74.5% chance of a third straight 75-basis point rate hike at the Fed’s September meeting.

Each of the 11 S&P 500 sectors were in negative territory, with the energy sector down 3.36%, the biggest percentage decliner, as oil prices settled down more than 5% on concerns that the slowing of global economies could sap demand.

Rate-sensitive megacap growth and technology stocks such as Microsoft Corp. (MSFT), down 0.85%, and Apple Inc. (AAPL), off 1.53%, were among the biggest drags on the benchmark index.

Both the S&P 500 and the Nasdaq have broken below their 50-day moving average. The S&P 500 also briefly fell below the 50% Fibonacci retracement level from its June low to August high, another key technical indicator watched by analysts as support.

The CBOE Volatility index, also known as Wall Street’s fear gauge, rose for the third straight session and hit a six-week high at 27.69 points.

Adding to worries, Taiwan’s military fired warning shots at a Chinese drone which buzzed an islet controlled by Taiwan near the Chinese coast.

Best Buy Co. (BBY) rose 1.61% as one of the biggest gainers on the S&P 500 after it reported a smaller-than-expected drop in quarterly comparable sales thanks to steep discounts.

Volume on US exchanges was 10.51 billion shares, compared with the 10.54 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 4.27-to-1 ratio; on Nasdaq, a 2.44-to-1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and 18 new lows; the Nasdaq Composite recorded 15 new highs and 217 new lows.

(Reporting by Chuck Mikolajczak; Editing by David Gregorio)

 

Aggressive Fed spurs worries over stock valuations

Aggressive Fed spurs worries over stock valuations

NEW YORK, Aug 30 (Reuters) – US stocks are looking expensive again to some investors, as the Federal Reserve’s hawkish message lifts bond yields and pushes market participants to reassess equity valuations.

The S&P 500’s forward price-to-earnings ratio, a common metric for valuing stocks, has crept back up to around 17 times earnings after a sharp rebound in equities from their mid-June low.

That valuation – far below the nearly 22 times forward P/E stocks commanded at the start of the year – may have seemed reasonable earlier this month, when markets were rallying on hopes that the Fed would end its monetary tightening sooner than previously anticipated.

Fed Chairman Jerome Powell all but crushed those hopes with an unambiguously hawkish message at last week’s Jackson Hole conference, and some investors now believe stock valuations may have to fall further to reflect the risks of rising bond yields and a looming recession.

Comparatively modest valuations were one of the biggest positives the market possessed at the end of the second quarter, when stocks stood near their lowest levels in 1-1/2 years after a six-month shellacking and forward P/E hovered at just above 15 times, said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.

After rallying 10% from their mid-June lows, stocks are “not pricing in as much risk, and that is something that the market is going to have to grapple with as we get through the back half of 2022,” Miskin said.

Among the dangers to equities is a rise in Treasury yields that has accelerated as investors come around to the idea that the Fed is determined to raise interest rates higher than markets had previously expected.

Climbing Treasury yields, which move inversely to bond prices, tend to pressure equities, in part because US government bonds offer a risk-free alternative to stocks. Rising yields weigh particularly on valuations of companies such as those in the technology sector that have high expected future earnings and are significant parts of indexes like the S&P 500.

The mid-June low for the S&P 500 came as the yield on the 10-year US Treasury note rose to about 3.5%, its highest level in over a decade. After sliding during the summer, the 10-year yield has rebounded to 3.1%.

As a result, the equity risk premium, the extra return investors expect to receive for holding stocks over risk-free government bonds, has recently fallen to roughly its lowest point since 2009, according to the Wells Fargo Investment Institute. Analysts there recommend that investors skew their portfolios away from equities and toward fixed income and commodities.

The stock market is “incredibly expensive when compared to the now-higher 10-year yield,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.

The S&P 500 has fallen 5% since Powell’s speech on Friday, as investors adjust their expectations for how high the Fed will lift rates. The S&P 500 was down 0.9% on Tuesday afternoon.

“The market had too quickly priced in a soft landing and had little room for error left,” wrote Keith Lerner, co-chief investment officer at Truist Advisory Services. “However, even after the pullback, it’s too soon to say the risk/reward is compelling.”

Still, current valuations are at a “premium level” given uncertainty in the earnings outlook and continued monetary tightening, Lerner said in a note on Monday. Based on current forward earnings projections, Lerner estimates a decline in the S&P 500’s P/E to 15 times would put the index at just above 3,600, around its June lows and equivalent to a drop of more than 10% from Monday’s closing level.

To be sure, there have been compelling arguments for owning stocks in recent months.

A better-than-expected US second-quarter earnings season, despite a cloudy economic outlook, helped fuel the recent rebound in stocks. S&P 500 earnings are now expected to rise about 8% in 2022.

But the profit outlook stands to weaken if the Fed raises rates so much that it results in a recession, as some investors expect. Data indicates more analysts are cutting earnings estimates as opposed to raising them, wrote Morgan Stanley strategists, presenting another potential threat to valuations.

Troy Gayeski, chief market strategist for FS Investments, said he sees little reason to own most stocks as the Fed hikes rates.

“We are staying very defensive,” he said. “It’s an environment to protect capital.”

(Reporting by Lewis Krauskopf in New York; Additional reporting by Megan Davies in New York; Editing by Ira Iosebashvili, Matthew Lewis and Jonathan Oatis)

 

Dollar edges higher as oversized Fed rate hike bets rise

Dollar edges higher as oversized Fed rate hike bets rise

NEW YORK, Aug 30 (Reuters) – The dollar edged higher on Tuesday, but was below the 20-year high it hit a day earlier, while the euro broke back above parity, as markets priced in super-sized interest rate hikes by the US Federal Reserve and the European Central Bank (ECB).

The greenback has been supported by aggressive rate hikes by the Fed in an effort to reel in decades-high inflation, and economic data released on Tuesday gave the central bank no reason to hold back.

One report showed that US job openings unexpectedly rose in July, while the previous month was revised sharply higher, suggesting a strong economy, despite two straight quarterly declines in gross domestic product. nL1N30619J

“This is one critical component of the labor market that will help the Fed justify aggressive rate hikes,” said Edward Moya, senior market analyst at Oanda. “If Americans have options to get employed, the Fed can ignore the rapid deterioration with the other economic releases.”

Other data showed a bigger-than-expected rebound in US consumer confidence in August after three straight monthly declines, which is potentially a positive signal for consumer spending.

Traders increased their bets on the chance of a third-straight 75-basis-point rate hike by the Fed in September to 74.5% from around 66.5% about an hour before Tuesday’s US economic data was released.

The dollar index was up 0.074% at 108.73 at 3:00 p.m. Eastern time (1900 GMT), after touching 109.48 on Monday, its highest level since September 2002.

Some traders had bet the Fed would pivot to a more accommodative stance early in 2023, but those expectations were dashed on Friday when Chairman Jerome Powell said at the Jackson Hole conference in Wyoming that the central bank would raise rates and keep them high for some time.

“The dust is finally settling now post-Jackson Hole, and the question for markets is, what’s going to change the narrative? And an argument is it’s Friday’s payroll, so we’re seeing a bit of a consolidation of last week’s move playing out here,” said Simon Harvey, an FX market analyst at Monex Europe.

All eyes will be on US nonfarm payrolls data for August on Friday, as any cooling in labor demand would ease pressure on the Fed to stick with outsized rate hikes.

The euro was 0.28% higher at USD 1.00245, rising back above parity with the greenback.

German inflation rose to its highest level in almost 50 years in August, beating a high set only three months earlier, data showed, strengthening the case for the ECB to go for a larger basis-point interest rate increase next month.

The single currency has risen over the past few sessions by aggressive pricing of expected ECB rate hikes, as well as a softening of natural gas prices, said John Hardy head of FX strategy at Saxo Bank.

British and Dutch wholesale gas prices eased on Tuesday as Europe almost reached its target of gas inventories being 80% full.

Sterling fell 0.38% to USD 1.16615 coming off of a UK bank holiday on Monday.

The dollar was up 0.05% against the rate-sensitive Japanese yen at 138.640 yen.

Bitcoin dipped back below the USD 20,000 level after having hit a six-week low of USD 19,526 over the weekend.

(Reporting by John McCrank in New York; Additional reporting by Alun John in Hong Kong; Editing by Jacqueline Wong, Bradley Perrett, Chizu Nomiyama and Jonathan Oatis)

 

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