Market Drivers – US Session – 10 March

Mohamed Abdelhamid 11 March, 2022 4:28 am Commodities, Forex Market, Global Stock Market, Market Update

The US dollar index has rebounded sharply from 97.72 on Thursday and is settling above 98.50 as inflation levels in the US hit skyscrapers.

The USD managed to post gains vs its European rivals and the JPY but lower against commodity-linked currencies.

Economic Data:

The US Bureau of Labor Statistics reported the US Consumer Price Index (CPI), which was in line with the estimate of 7.9% but well above the prior record of 7.5%.

This has significantly raised the odds of an aggressive tightening monetary policy by the Federal Reserve.

The data of 7.9% for US CPI belongs to February and is not multiplied by the elevated oil prices. The oil prices have retreated from multi-year highs principally but are still higher almost 10% in March.

Energy prices could force the Fed to resort to a 50 basis point (bps) hike in the interest rate decision. Higher inflation levels may force the Fed to confirm a 50-basis point interest rate hike in next wee’s policy meeting.

Other Developments:

The fourth round of peace talks between Russia and Ukraine ended abruptly and without an agreement on ceasefire or humanitarian corridors. International sanctions on Russia pile up, but Moscow shows no signs of giving up after fifteen days.

The European Central Bank announced its monetary policy decision. As widely anticipated, rates were left unchanged. However, Lagarde announced a twist in their Asset Purchase Program (APP) that is now set to end in the third quarter of this year. The APP will amount to 40 billion euros in April, 30 billion euros in May and 20 billion euros in June.

President Christine Lagarde noted that Moscow’s invasion of Ukraine is a watershed for Europe and is now a new downward risk, repeating they “will do everything within our mandate to pursue price stability.” The central bank downwardly revised its growth forecasts.

The EUR/USD pair is back below the 1.1000 level, while GBP/USD is barely holding above 1.3100. The AUD/USD pair trades near a daily high of 0.7363, while the USD/CAD hovers around 1.2750.

The inflation data news put pressure on Wall Street, already weighed by geopolitical turmoil. US indexes remain in the red heading into the close but managed to trim half of their early losses.

The yield of the US 10-year Treasury note hit 2.02% and heads into the close at around 2.0%.

Gold finishes the day unchanged, trading a few bucks below the $2,000 threshold. Crude oil prices eased, with WTI now changing hands at around $106.20 a barrel.

Oil’s decline was attributed to comments from Russian President Vladimir Putin, who said that Moscow would keep its energy-related commitments.

The major event on Friday: Michigan Consumer Sentiment Index by the University of Michigan.

Major events for next week include Producer Price Index, New York Empire State Manufacturing Survey, Retail Sales, Interest Rate Decision (most important), Initial Jobless Claims, Industrial Production, and Existing Home Sales.

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