Summary:
Global shares rallied and the dollar eased on Tuesday after U.S. consumer price data showed inflation barely rose in May, increasing expectations the Fed will pause in June.
Global shares rallied and the dollar eased on Tuesday after U.S. consumer price data showed inflation barely rose in May, increasing expectations the Fed will pause in June.
Oil prices climbed over 3% on hopes for growing fuel demand after China's central bank lowered a short-term lending rate for the first time in 10 months.
The annual increase in the consumer price index was the smallest in more than two years but underlying price pressures are still strong.
Commodities
Brent's six-month backwardation fell to its lowest since March at around $1.10, indicating faltering confidence that demand will exceed supply over the year.
‘For market participants to start building up long positions again, they likely need to see larger inventory declines,’ said UBS strategist Giovanni Staunovo, adding he expected this to happen within weeks.
The OPEC kept its forecast for 2023 global oil demand growth steady for a fourth month on Tuesday, slightly increasing expectations of Chinese demand growth.
Forex
The dollar dropped to a three-week low on news of the smallest annual increase in inflation last month in more than two years.
Traders of futures tied to the Fed's policy rate now expect a roughly 93% chance the Fed will keep the benchmark rate at 5.00% to 5.25% this week.
Elsewhere, sterling jumped after employment data came in much stronger than expected, with wages rising sharply, adding to inflation concerns.
The pound hit a five-week high of $1.2625 against the dollar as traders bet the BoE would have to raise rates further than previously expected.
Thursday marked the week's final settlement before Easter, with light trading. Brent and WTI rose about 5%, their first weekly gain in 3 weeks.
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