The dollar strengthened on Tuesday after the release of upbeat ISM manufacturing data. The report released on Monday showed that the rise in construction spending slowed to 0.0%, below expectations of 0.3%, whereas domestic vehicle sales were slightly lower than forecasts at 12.79M with expectations being at 12.94M. In terms of production activity, the US economy also exceeded modest forecasts, with the key index rising to 57.8 points, above expectations of 55.3 points. Investors are eying the release of the June Fed minutes tomorrow to get more information about the regulator’s intentions to reduce credit support for the economy.

Dollar futures rose to 96.00, continuing a two-day correction from the September low of 95.00. However, there is a possibility of a trend reversal, with the US currency turning into a medium-term rally, as investors bet on the Fed’s decision to hike rates for the third time this year. This is confirmed by the futures market, where the chances of raising rates exceeded 50%, against 43.6% last week.

The dollar shrugged off concerns associated with the successful launch of an intercontinental ballistic missile by North Korea, but safe heavens which are more sensitive to international confrontations have risen in price. USDJPY decreased by 0.18%, despite dollar gains, while some investors found relief in gold bets which added half a percentage, due to a correction from lows of $1,220 per troy ounce. European and Asian indices also declined on global risk aversion.

OPEC is not in a position to achieve a coordinated position on production with its members, in particular with those which have not signed a pact to limit production. The production of the cartel is growing thanks to supplies from Nigeria and Libya that are exempted from quotas. Bearish dynamics suggest that market participants are expecting an increase in commercial inventories in the US, awaiting a report from API today and EIA tomorrow. The North Korean missile struck injured global risk appetite with its impact also seen in the oil market. Both grades have lost about half a percentage point after an impressive 8-day rally, which boosted the bulls, although it appears to be too early to turn buoyant.

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