Equity markets in the Middle East opened lower on Wednesday and were in the red in the afternoon as the U.S. dollar rose and oil prices fell ahead of the Fed's minutes on what's next for interest rate hikes.
The Saudi stock market was closed on Wednesday for a public holiday, but the stock indexes in Qatar, Abu Dhabi, and Dubai were all lower in early trade, dragged down by falling oil prices and a rising dollar.
Since most Middle East currencies are pegged to the U.S. dollar, the Fed's monetary policy usually has a direct impact on the policy of the central banks in the Gulf region, Reuters notes.
Meanwhile, oil prices were lower early on Wednesday, with WTI Crude down by 0.77% at $75.73, and Brent Crude trading down by 0.89% at $82.38, ahead of the publishing of the Fed minutes.
The most recent economic data pointed last week to a resilient U.S. economy and job market, suggesting that the Fed could be more hawkish with interest rate hikes to cool inflation.
"Markets continue to come to terms with expectations of a more hawkish Fed, following a raft of economic data suggesting the Fed still has quite a bit of work to do," ING strategists Warren Patterson and Ewa Manthey said on Wednesday.
"These headwinds, combined with a fairly comfortable oil balance, mean that the oil market will likely remain rangebound," they added.
But ING sees the market breaking out of this range later this year as the oil market is expected to tighten significantly.
According to Saxo Bank's daily market commentary on Wednesday, "Crude oil prices dipped further with dollar strength in play as the expectations of rate hikes from the Fed continued to ramp up."
"Overall, the oil market remains rangebound, in Brent between $80 and $89 and WTI between $73 and $82, as the market weighs the impact of rising demand in China and India versus a potential slowdown elsewhere," Saxo Bank said.
By Charles Kennedy for Oilprice.com
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