US CPI numbers
The US (SPY) (VOO) CPI (consumer price index) rose 0.4% on a month-over-month basis in October, according to a report by the US Department of Labor on November 17, 2016. It was in line with analysts’ forecasts. A rise in gasoline prices (GASL) was the major contributor to the rise in inflation. The inflation rate is an important economic data point that impacts interest rate decisions. The market’s expectation of a rate hike due to firming inflation could strengthen the US Dollar Index (UUP).
US Dollar Index and crude oil
Although both crude oil and the US Dollar Index gained in the past five trading sessions, the correlation between crude oil prices and the US dollar (UUP) was -35.8%. The correlation is negative. It indicates the US dollar’s inverse impact on crude oil prices to some extent over this period. A weaker dollar makes crude oil cheaper for oil-importing countries—it boosts prices. The opposite is also true.
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) (UCO) 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).