US Market 

The US dollar touched a 3-week high on Thursday (Aug 18) after minutes from the Federal Reserve’s (Fed) July meeting pointed to US interest rates staying higher for longer to bring down inflation. The stronger greenback caused the pound briefly to dip below US$1.2 in early European trading, its lowest in 3 weeks, the euro to drop to as low as US$1.0146 and the Japanese yen to drift down to 135.45 per US dollar. This pushed the US dollar index as high as 106.96, its highest since late July. Fed officials saw “little evidence” late last month that US inflationary pressures were easing, minutes released on Wednesday showed. They flagged an eventual slowdown in the pace of hikes, but not a switch to cuts in 2023 that traders until recently had priced in to interest-rate futures. Traders see about a 40 per cent chance of a third consecutive 75 basis point Fed rate hike in September, and expect rates to hit a peak around 3.7 per cent by March, and to hover around there until later in 2023.

Oil rose as investors weighed lingering concerns about a global economic slowdown against bullish signals from the US and the Organization of the Petroleum Exporting Countries (Opec). West Texas Intermediate (WTI) climbed 1.1 per cent to over US$89 a barrel, while Brent jumped by 1.4 per cent to almost US$95. Oil’s main contracts have both traded in a narrow range for the past few days, though futures are still on track for a weekly loss as fears over a downturn and the potential for more supply from Iran continue to hang over the market. A bullish Energy Information Administration (EIA) report offset some of the gloom over a potential recession. US crude stockpiles sank by 7.06 million barrels last week, exports rose to a record and petrol demand climbed to the highest this year. Crude is trading near the lowest level in more than 6 months after giving up the gains made since Russia’s invasion of Ukraine, with time spreads signalling that market tightness is easing. Still, Opec’s new secretary-general Haitham Al Ghais said spare production capacity was “becoming scarce”, adding that he was confident demand will increase this year. 

The number of Americans filing new claims for unemployment benefits fell moderately last week, suggesting some loss momentum in the labour market against the backdrop of higher interest rates. Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 250,000 for the week ended Aug 13, the Labor Department said on Thursday (Aug 18). Data for the prior week was revised to show 10,000 fewer applications filed than previously reported. Economists polled by Reuters had forecast 265,000 applications for the latest week. Though claims have drifted higher in recent weeks, they remain below the 270,000-300,000 range that economists said would signal a material slowdown in the labour market. Companies in the interest rate-sensitive housing and technology industries have been laying off workers in response to slowing demand caused by the Federal Reserve’s aggressive monetary policy tightening campaign to tame inflation. The US central bank has raised its policy rate by 225 basis points since March. Minutes of the Jul 26-27 policy meeting published on Wednesday showed that though Fed officials “observed that the labour market remained strong”, many also noted “there were some tentative signs of a softening outlook for the labour market”.