Market Bizzz

The oil market has been pulled lower by worries about U.S. interest rate hikes to curb inflation which would trigger a recession and curtail fuel demand, offsetting hopes for fuel demand growth in China, the world’s second largest oil consumer, as it eases COVID-19 curbs and resumes international travel.

Gold is highly sensitive to rising interest rates, as that increase the opportunity cost of holding the non-yielding bullion. Meanwhile, European Central Bank’s governing council member Mario Centeno said on Tuesday the current process of interest rate increases is approaching its end.

Recent comments by other Fed officials have supported the view that the central bank needs to remain aggressive in raising interest rates to control inflation. Fed Governor Michelle Bowman said on Tuesday the bank will have to raise interest rates further to combat high inflation.

Wage growth across the euro zone is expected to be “very strong” over the next few quarters but real wages are still likely to decline given rapid inflation, a European Central Bank Economic Bulletin article argued on Monday.

The dollar index rose 0.1% after hitting a seven-month low in the previous session. A stronger dollar makes oil, which is priced in the currency, more expensive for foreign buyers.

A consumer prices report due Thursday could be key for rate expectations, said Quincy Krosby, chief global strategist, LPL Financial in Charlotte, North Carolina. “The CPI report this week is going to be essential for fine-tuning the Fed funds futures market.”