Investing.com - Here are the top five things you need to know in financial markets on Wednesday, January 4.
1. Dollar backs off 14-year highs
The dollar pulled back from 14-year highs against a currency basket on Wednesday with investors wary of pushing the dollar any higher before getting fresh indications on the strength of the U.S. economy and the expected pace of rate hikes this year.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.3% to 102.94. The index hit highs of 103.81 on Tuesday, the most since December 2002.
Traders were looking to Friday’s U.S. nonfarm payrolls report for December for indications on solid growth in the labor market, which could enable the Federal Reserve to keep pushing up interest rates.
2. Oil prices edge higher ahead of U.S. inventory data
Oil prices edged higher on Wednesday as traders awaited U.S. inventory data, amid hopes that major producers will stand by their agreement on planned production cuts aimed a draining a global supply glut.
Brent crude was trading up 12 cents, or 0.22% at $55.59 a barrel at 11.09 GMT, while U.S. crude was up 10 cents or 0.21% at $52.44.
Oil prices ended sharply lower on Tuesday as the strong dollar weighed, after surging to 18-month highs earlier in the day.
The planned cuts and the way U.S. producers respond to rising prices will help set the direction for the oil market going into the new year.
3. U.S. stock futures point to higher open on Wall Street
Wall Street futures pointed to a higher open for the major U.S. indexes on Wednesday, a day after U.S. stocks recorded strong gains as a post-election rally extended into the new year.
The Dow futures were up 18 points or 0.09% to 19,816 points, priming for another test of the historic 20,000-point milestone.
S&P 500 futures added 2.25 points or 0.1%, while the tech-heavy Nasdaq 100 futures were up 4.63points or 0.9%.
4. China acts to support weak yuan
China's yuan firmed up after the central bank fixed a stronger daily trading midpoint on Wednesday, shoring up the faltering currency.
The move helped the yuan edge higher, while the offshore yuan hit a two-week high.
Last week China’s Foreign Exchange Trade System said it was changing the composition of the basket that is used to set the yuan's daily value. The number of currencies in the basket was increased to 24 from 13 on January 1.
5. Fed December meeting minutes ahead
The Federal Reserve is to publish the minutes of its December 13-14 meeting at 14.00 ET.
Fed officials decided to raise the benchmark interest rate by a quarter of a percentage point at the meeting, the first rate hike in a year.
Analysts will be examining the minutes for any indications that officials are more upbeat on growth than the quarterly economic projections released following the meeting showed.
Analysts will also be looking for what Fed officials said about potential fiscal policy changes under the incoming Trump administration and how they may react to measures that could spur growth and inflation.