Market Drivers – US Session – July 20

Due to lower-than-expected profits and data that could justify further Federal Reserve rate hikes, US stocks slightly declined on Thursday. The Dow Jones managed to close with a 0.45% gain while the Nasdaq lost over 2% of its value.

The DXY increased 0.55% as the US dollar increased, moving closer to 101.00. The US 10-year Treasury note reached 3.87%, which is the highest level in a week, driving the greenback higher in response to higher Treasury yields. US initial claims for unemployment decreased to 228K, the lowest number since mid-May.

The Pound lost ground against the US Dollar but gained versus the Euro. GBP/USD fell for the fourth consecutive day, finding support at the 20-day Simple Moving Average (SMA) at 1.2830. The UK will report June Retail Sales on Friday. USD/JPY posted its highest daily close in a week, reaching levels above 140.00, boosted by higher US Treasury yields. The National Consumer Price Index for June is expected to advance from 3.2% to 3.5%.

USD/CHF posted its biggest daily gain in weeks amid higher bond yields in Europe, recovering from the lowest levels since 2015. The Australian dollar outperformed on the day, boosted by Australian employment data.

The Fed is widely expected to resume policy rate increases next week, with the FOMC tightening rates by 25 basis points. Eurozone consumer confidence data improved marginally from -16.1 to -15.1 in July. Markets expect a rate hike from the European Central Bank (ECB) next week, with the focus on the language, with participants looking for clues about what might happen in September.

Economic Data

Some data reports came in mixed, with the Philly Fed at -13.5 in July and Existing Home Sales falling 3.3% in June. A 25 basis point rate hike from the Fed is priced in for next week, and the odds of another hike before year-end rose modestly after the latest data.

In the US, the number of first applications for unemployment insurance reached 228,000 in the week ending July 15. This reading is the lowest level since early May. The number followed the previous week’s reading of 237,000 (unrevised), which was below market expectations of 242,000. Furthermore, “the 4-week moving average was 237,500, a decrease of 9,250 from the previous week’s unrevised average of 246,750.”

Also Read:

EUR/USD licks dragged lower on strong US dollar

Wall Street’s rally weakens after Tesla, Netflix miss estimates

El Salvador’s bonds benefited from Bitcoin’s recent gains

Sterling continued its slide as hawkish BoE expectations eased

WTI abandons daily gains on US dollar’s momentum

Gold retreats from 7-week high on Fed rate hike-linked fears

After US Jobless Claims reading, USD/JPY rises back above 140.00

Soaring T-yields boost US dollar’s recovery