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Market Drivers – US Session – Mon. 09/05/2023
The US dollar rose against its main rivals, with the US Dollar Index (DXY) rising by 0.25% and posting gains for the second day in a row. However, the index still remains near the key support level of 101.00.
Wall Street dropped during the US quiet session as investors shifted their focus on the US consumer inflation data. The Dow Jones fell by 0.17%, while the Nasdaq slid 0.63%. The ongoing debt ceiling impasse is weighing on market sentiment.
Economic Data
Data released on Tuesday showed the US NFIB Small Business Optimism index dropped to 89 in April, the lowest reading since 2013.
On Wednesday, the US will release the Consumer Price Index (CPI) data for April, which is expected to have a significant impact. Market consensus see the CPI rising by 0.4% in April, which would be an acceleration from 0.1% in March. The annual rate is expected to stay at 5%. The Core CPI is forecast to match the 0.4% increase of April, with the annual rate dropping from 5.6% in March to 5.5% in April.
If the US inflation numbers come in line with expectations, it would indicate a modest slowdown, which is likely to maintain the Federal Reserve’s (Fed) tightening bias. In the afternoon, the April fiscal numbers will be reported, and a significant surplus is anticipated for April. On Tuesday, US bond yields experienced a slight increase, with the 2-year yield remaining above 4.0% and the 10-year yield climbing above 3.50%.
EUR/USD experienced a decline for the third time in the past four days, dropping below the 20-day Simple Moving Average (SMA), for the first time since mid-March. The pair found support at 1.0940. Despite hawkish comments from European Central Bank (ECB) officials, the Euro lagged behind. Germany is set to release the final reading of April CPI, which is not expected to bring any surprises.
Key Developments
On Tuesday, GBP/USD managed to recover from its earlier losses and closed unchanged around 1.2620. The British Pound continues to exhibit strength ahead of Thursday’s Bank of England decision. Meanwhile, EUR/GBP fell below 0.8700, reaching its lowest level since December.
USD/JPY has recorded a modest increase for the third consecutive day, benefiting from higher US yields, and ultimately closing above 135.00. In Japan, the release of the Leading Economic Index (March preliminary) is expected.
USD/CAD advanced further but it was unable to reclaim the 1.3400 level. On Wednesday, Canada is scheduled to release the Building Permits data for March. AUD/USD declined after a five-day streak, but managed to hold above 0.6750, while the critical resistance level at 0.6800 remains near.
Gold maintained its gradual ascent, nearing the $2,040 mark, as market participants eagerly await US data. Silver, on the other hand, remained relatively stable, hovering around the $25.50 level. Crude oil prices managed to recover from earlier losses and recorded slight gains, with WTI (West Texas Intermediate) experiencing a 0.45% increase.
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