The dollar index, which measures the strength of the greenback against a basket of foreign currencies, broke below the 100 mark for the first time since mid-April 2022.
What Happened: The dollar index could move down quickly to 90, said economist and gold bull Peter Schiff. This would send oil soaring above $100 and put significant upward pressure on U.S. import costs, he said.
Crude oil is denominated in gold and they share an inverse relationship. Oil has been seeing weakness for over a year now following its strong performance in the first half of 2022.
The last time the WTI grade crude oil traded above $100 on an intraday basis was on July 20, 2022, and it plunged to a low of $63.64 on May 4, 2023. The black gold has since then staged a recovery.
At last check, the commodity edged down 0.10% to $76.81.
The downtick inflation in July 2022 is partly due to the pullback in energy prices.
See Also: Best Inflation Stocks
Pass-Through Effect: Schiff warned of higher oil prices pushing up the costs of imports to the U.S.
"Higher prices will reflect in the #CPI, reversing any progress #Fed rate hikes made in reducing #inflation," the economist said.
The Fed began hiking rates in March 2022 to cool off inflationary pressure set in motion by stimulatory policies introduced in the wake of the COVID-19 pandemic. Before the pause in the June meeting, the central bank aggressively raised rates in each of its monetary policy meetings.
Economists are of the view the Fed acted late in curbing inflation, and once it started, it has gone on beyond what is warranted.
The Invesco DB US Dollar Index Bullish Fund UUP fell 0.68% to $27.57, according to Benzinga Pro data.
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