Market Drivers – US Session – Tuesday, July 26

a large amount of speculative interest was paying attention to US bond yields. The yield curve is the most inverted since 2000. 2-year Treasuries are yielding 3.03%, while the 10-year note yields 2.76%. An inverted curve is usually a sign of an upcoming recession.

Economic Data

Home purchases, in the United States, dropped 8.1% in June to an annualized 590,000 rate. The number of homes sold awaiting start is at the highest level since January 2022.

After posting its lowest reading in a decade in June, the consumer confidence index slipped further to 95.7 from last month’s 98.4, which was revised lower.

Other Developments

Biden’s administration on Tuesday said it will sell an additional 20 million barrels of oil from the Strategic Petroleum Reserve as part of a previous plan to tap the facility to calm oil prices.

The International Monetary Fund cut the global growth forecast once again this year, from 3.6% in their April review to 2.9%. IMF also warned that downside risks from overheated inflation and the Ukraine war could push the world economy to the edge of a global recession.

The World Economic Outlook also showed that in the case Russia complete cut gas to Europe and a drop in the country’s oil export would slow growth further in 2023.

The Euro was again among the weakest performers among the dollar’s rivals, with EUR/USD flirting with 1.0100. GBP/USD held above 1.2000, while the AUD/USD settled at 0.6935. The USD/CAD pair advanced amid weaker oil prices, trading near 1.2890.

Save-haven currencies saw little activity, with USD/CHF steady around 0.9620 and USD/JPY now trading at 136.75.

Spot gold remained within familiar level, although near the lower end of its latest range. Gold changed hands at $1,717 per ounce.

Crude oil prices edged lower, partially due to the dismal mood but also because of a US decision to sell additional 20 million barrels of oil from its Strategic Petroleum Reserve. The barrel of WTI finished the day trading at $94.90 a barrel.

The focus now shifts to the Fed. The US central bank is widely anticipated to hike the funds rate by 75 bps, although there is a chance of a 100-bps movement. The latter has become increasingly unlikely since the latest Fed meeting, as economic growth keeps deteriorating. Policymakers may not risk a recession to tame inflation.

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