US CPI numbers
The US (SPY) (VOO) CPI (consumer price index) was flat on a month-over-month basis in July, according to a US Department of Labor report released on August 16, 2016. Analysts had also forecasted flat numbers. The fall in gasoline (GASL) prices was a major contributor to flat inflation numbers. The year-over-year inflation rate was 0.8% in July 2016.
The US CPI number is one of the most important economic data points. It impacts interest rate decisions. The market’s expectation of a rate hike could boost the US Dollar Index (UUP), which could have a negative impact on crude oil prices (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI). Read What’s the Correlation between Crude Oil and the Dollar Index? to learn more. However, a strong economy could mean strong crude oil demand, which would support crude oil prices.
Impact on energy ETFs
Energy ETFs are also impacted by economic data and the correlation between crude oil prices (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI) and the US Dollar Index. These ETFs include the Direxion Daily Energy Bear 3X ETF (ERY), the First Trust Energy AlphaDEX ETF (FXN), the United States Brent Oil ETF (BNO), the Energy Select Sector SPDR ETF (XLE), and the United States Oil ETF (USO).
In the next part of this series, we’ll look at the weather forecast and see how it could impact natural gas prices.