Dollar holds up ahead of retail sales, energy prices soar, cryptos rise

The market mood is mixed as hopes of cooling US inflation are offset with soaring energy costs which threaten to undermine growth. Booster COVID-19 vaccine shots are being debated and cryptocurrencies are on the rise.

Weaker US inflation figures are insufficient to depress the dollar. A day after core inflation missed estimates, the world’s largest economy reported that import prices surprisingly dropped in August. The dollar dipped but found fresh demand as investors have other reasons to worry about.

Energy: US WTI Crude Oil extended its gains and nears $73 after US inventories showed another substantial drawdown. Moreover, there is growing fear of a shortage in natural gas in Europe ahead of the winter. Worries about other commodity prices have prompted China to release several metals from its reserves.

EUR/USD has failed to move away from the 1.18 magnet, partly due to the European Central Bank’s calm approach to inflation. ECB President Christine Lagarde speaks later in the day.

GBP/USD is trading near 1.38, shedding gains related to high UK inflation data. Prime Minister Boris Johnson’s government reshuffle resulted in no changes in key economic positions.

The focus on Thursday is on Retail Sales, which are projected to have dropped in August for the second consecutive month. Consumption is central to the US economy.

The Philly Fed Manufacturing is also of interest after the parallel read from the New York region beat estimates. Weekly jobless claims are set to bounce off the lows.

AUD/USD is trading above 0.73 after Australia reported a larger-than-expected drop in employment, 146,300 in August. NZD/USD is trading around 0.71, higher after New Zealand’s outstanding growth data – the economy grew by 2.8% in the second quarter, more than double the early estimates.

Coronavirus vaccines: Data from Moderna and Pfizer shows booster shots reduce the chances of breakthrough infections and that the effect of immunization wanes over time. Experts are at odds over the necessity of third jabs. Cases remain elevated in the US and the UK, and lower in Europe.

Cryptocurrencies are edging higher, with Bitcoin trading above $48,000 and Ethereum nearing $3,700. Ada is also recovering, hovering near $2.50. Ray Dalio, the founder of Bridgewater, said he owns a “certain amount” of Bitcoin.

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