Market Drivers – US Session, Nov. 21

Mohamed Abdelhamid 22 November, 2023 1:59 am Commodities, Forex Market, Market Update

Gold rose sharply despite steady yields and peaked at $2,007. It then pulled back toward the $2,000 area. The critical level to break is $2,010.

The US dollar’s increase on Tuesday was seen as a corrective measure because the currency remains vulnerable until the market refocuses on the story of growth rather than the Federal Reserve’s (Fed) decision to postpone interest rate increases.

The FOMC minutes state that members would consider it appropriate to tighten monetary policy even further if “incoming information indicated that progress towards the Committee’s inflation objective was insufficient.” Participants also concluded that policy should maintain a restrictive stance for some time until inflation is clearly declining sustainably in the direction of the Committee’s goal.

The US Dollar Index, which had fallen as low as 103.17—the lowest level since August—turned positive and moved above 103.50. The correction took place during a period of stable US yields.

After sliding from above 1.0950, EUR/USD finished lower. The EUR/GBP fell towards 0.8700, and the Euro trailed behind. Consumer Confidence data with preliminary estimates for November will be released by Eurostat.

The pound was one of the best performers, helped by the Bank of England’s Monetary Policy Members’ aggressive remarks. With a close above 1.2500, GBP/USD saw its highest closing day since early September. The Autumn Forecast Statement, which will be delivered by UK Chancellor Jeremy Hunt, will centre on choices about taxes and public spending.

After hitting a low of 147.08, the USD/JPY increased to 148.30. The couple gives indications of stability.

Economic Data

Canada’s inflation statistics revealed that the Consumer Price Index (CPI) increased 3.1% over the previous year, less than the 3.8% increase that was recorded in October and less than the 3.2% market consensus. According to the data, inflation is still declining and has little effect on the market.

A new cycle low was reached in the BoC’s preferred measures of core CPI, which slowed to 3.55% from 3.80% y/y. However, on a 3m annualized basis, the decline to 2.96% from 3.7% was even more noteworthy. The Bank will be even more convinced that policy is tight enough to bring inflation back to target.

This could help set up a change in tone from the BoC early next year, but the Bank will still need to see more evidence of easing inflation pressures.

Other Developments

The Australian Dollar lagged despite the modestly hawkish Reserve Bank of Australia meeting minutes and Governor Bullock’s comments. AUD/USD reached the 200-day Simple Moving Average and turned downwards, falling to the 0.6550 area. The trend remains upward. On Wednesday, Bullock will speak again; however, no surprises are expected.

What to watch on Wednesday?

In the Asian session, the focus will be on the Australian Westpac Leading Index and the impending speech by RBA Governor Bullock.

Later on the day, US data—such as Jobless Claims, Durable Goods Orders, and the University of Michigan Consumer Sentiment survey—will be in focus ahead of the Thanksgiving holiday. US markets will be closed on Thursday for observing Thanksgiving holiday.

USD/CAD remains around 1.3700, showing indecision. Bank of Canada’s Governor Tiff Macklem will speak on Wednesday.

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