A broad selloff in commodities and dollar strength point to disinflationary pressures on the horizon that weaken the argument for a near-term rise in U.S. interest rates, according to some analysts.
This week has seen gold prices tumble to five-year lows and U.S. oil prices dip below $50 a barrel for the first time since April, with prices stabilizing a little on Tuesday.
"Given that weak commodity prices are likely to prompt a ripple out disinflationary effect it is hard to see how the Fed (U.S. Federal Reserve) would even consider hiking rates against such a weak backdrop, something markets don't appear to be considering at the moment," Michael Hewson, chief market analyst at CMC Markets UK, said in a note on Tuesday.
The Fed is expected to hold off on raising interest rates until prices start to pick up. Data released last week showed the U.S. Consumer Price Index (CPI) rose 0.3 percent in June after a 0.4 percent rise in May, pushing the year-on-year CPI rate into positive territory for the first time since December.