The dollar is in decline after the worst one-day sell-off in months. Nevertheless, the debate over inflation and interest rate hikes continues, with Philadelphia FRB head Patrick Harker saying he is ready for more than 3 rate hikes this year and Lael Brainard set to appear before the Senate for her confirmation hearing as vice chairman of the central bank.

Delta Air Lines’ report may shed light on the impact of the growing wave of COVID-19 cases in the U.S., while another major auto plant in one of China’s most important ports has closed. Here’s what you need to know about the financial market on Thursday, Jan. 13.

The dollar’s selloff has slowed after it hit a 2-month low

The dollar has stabilized after its biggest daily drop in 3 months, a sign that the global market believes the risks of tighter U.S. monetary policy are now fully priced in. By 06:15 a.m. ET, the dollar index, which tracks its exchange rate against a basket of currencies from 6 advanced economies, was down 0.1 percent to 94.812 after falling more than 0.6 percent on Wednesday amid growing hopes that inflation may be nearing a peak. Data released Wednesday showed U.S. annual inflation rose 7%, the highest since 1982, but analysts said a combination of factors is making the situation worse than it is. Talk of tightening monetary policy is unlikely to stop. Federal Reserve Bank of Philadelphia Governor Patrick Harker told the Financial Times that he is open to more than 3 interest rate hikes this year, while Lael Brainard’s prepared remarks for her confirmation hearing as vice chair on Thursday emphasize the paramount need to bring inflation down.

PPI and jobless claims

Perhaps the best indicator of current inflation dynamics will be released at 08:30am ET (13:30 GMT) when US producer price inflation (PPI) data for December is released. Overall prices are expected to rise 0.4% month-on-month, their lowest monthly increase in a year, while core prices are expected to rise 0.5%, a more modest slowdown after a shock acceleration in December. U.S. jobless claims, due for release at the same time, are expected to have been near a post-pandemic low of 200k last week.

US market to open slightly up; Delta earnings in focus

Stock indices in the US will open mostly higher later in the day as risk appetite has revived due to recent developments on the monetary policy front. However, gains may be limited by the realization that the change in interest rate sentiment has also been driven by the worrisome spread of COVID-19 in the US over the past 2 weeks, raising the possibility of a near-term slowdown. Delta Air Lines’ earnings report, which will be released earlier, may shed some light on this. By 06:15 a.m. ET, Dow Jones futures were up 48 points, or 0.1%, while futures contracts on the S&P 500 and the Nasdaq 100 were up a similar amount. Meanwhile, the yield on the benchmark 10-year Treasury bond appeared to have completed a short-term correction, rising again to 1.75%.

Hospitalizations break new record; China’s port problems worsen

The number of hospitalizations in the U.S. hit a new record high on Wednesday, making it increasingly clear that omicron’s higher transmissibility largely offsets the positives to be drawn from its weaker virulence. Sickness-related absenteeism remains an acute problem both in the US, which averaged more than 780,000 new cases a day last week despite Wednesday’s sharp drop, and elsewhere, with France reporting more than 360,000 new cases for the second day in a row on Wednesday, but it is still easing travel restrictions to neighboring Britain, believing there is no point in adding economic damage when the spread of the virus is already so active. The risks associated with COVID-19 are also still evident in China, where Volkswagen has followed Toyota in closing 2 of its plants in the port of Tianjin. Disruptions in the ports of Tianjin, Dalian and Ningbo lead to congestion in Shanghai, the world’s busiest port.