The greenback could continue its ascent after short-lived consolidation
US stocks finished lower overnight for a second day in a row as investors stayed cautious ahead of the inflation report that could add to a downbeat tone in the market should the figures reflect further rise in consumer prices. The corporate earnings season also made investors nervous, with market players keeping a close eye on downside risks to earnings forecast amid persisting inflationary pressures. However, PepsiCo reported a better-than-expected quarterly profit and raised its revenue outlook in yesterday’s report. At the close of trade, the Dow Jones Industrial Average dropped 0.62%, the S&P 500 slid 0.92% and the Nasdaq Composite fell 0.95%.
Despite negative cues from Wall Street, Asian equity markets were mixed-to-higher on Wednesday, with MSCI’s broadest index of Asia-Pacific shares outside Japan gaining 0.66% after two straight days of losses. Japan’s Nikkei 225 added 0.54% while the yen came back under selling pressure after a short-lived bounce from fresh 24-year lows. Elsewhere, the Reserve Bank of New Zealand hiked its policy rate by 50 basis points as expected. The bank noted that the weaker NZD was having an impact on import prices.
In Europe, European stocks opened lower on Wednesday, staying on the defensive ahead of the latest inflation data from the United States. The June CPI is expected to show headline inflation rising above May’s 8.6% level to 8.8%, which in turn could prompt the Federal Reserve to hike interest rates by another 75 basis points later this month. Meanwhile, the UK’s economy expanded unexpectedly by 0.5% in May while analysts had anticipated zero growth.
In currency markets, the US dollar has steadied after another rally towards fresh multi-year tops on Tuesday. The USD index extended gains to 108.55 before retreating marginally. Still, the price was holding above the 108.00 mark in early European deals, suggesting the greenback could continue its ascent after short-lived consolidation. Strong inflation numbers could add to the bullish tone surrounding the US currency.