The dollar remains firm ahead of hot U.S. inflation data

On Tuesday, the U.S. dollar held steady as Treasury yields spiked to a three-year high ahead of U.S. inflation data that may signal even more aggressive interest rate hikes from the Federal Reserve. At the beginning of the week, the market mood was sour. The greenback was recovering against its major rivals to reach multi-year highs above the 100 mark. Strong demand for safety pushed gold prices higher, lifting the bright metal above $1,950 per ounce.

Investors will likely continue to fret about inflation in the next few days as they wait for the inflation data forecast for Germany and the U.S. later today.

Oil prices climbed ahead of EIA's report

On Tuesday, the oil price rose modestly as fears of a China demand slowdown eased after Shanghai relaxed some restrictions related to COVID-19. The rise in oil prices also follows a warning from the Organization of the Petroleum Exporting Countries (OPEC) that sanctions or voluntary measures could result in the loss of 7 million barrels of Russian oil a day, which cannot be replaced.

Members of the International Energy Agency plan to release 240 million barrels over the next six months in order to calm volatile oil markets. Of these barrels, 180 million will be released from U.S. stockpiles at 1 million barrels per day starting in May.

EIA's short-term energy outlook will be released later today, which will bring more sight into demand and supply forces.

US CPI data and market volatility

Today's primary focus will be the US CPI number for March, which is expected to push well above 8%. CPI increased by 7.9% in February, while core prices rose by 6.4%.

In the wake of the Federal Reserve's first interest rate hike since 2018, much has been made of the timeline of how significant the following few rate hikes will be, with the odds of more than one 50 bps rate hike in the coming months.

Meanwhile, the U.S. labour market continues to strengthen, with an unemployment rate of 3.6% and wage growth of 5.6%.

Equity markets have been remarkably resilient and quite relaxed compared to fixed-income markets. In any event, the Fed meeting at the end of May will likely include some kind of announcement regarding the tapering of quantitative easing, which would likely lead to an increase in volatility for equities.