Market Drivers – US Session 3/10/2022

Mohamed Abdelhamid 4 October, 2022 4:27 am Commodities, Forex Market, Market Update

The US dollar resumed its decline at the beginning of the week on the first US trading session in October, ending Monday with losses across the board while Government bond yields were sharply lower but moved off their intraday lows ahead of the close.

The EUR/USD pair was able to advance and settled around 0.9820, with the Euro among the worst performers against the USD. Finally, the dollar posted uneven advances against its safe-haven rivals, with USD/CHF now trading at 0.9930 and USD/JPY at 144.75.

Wall Street edged up where European indexes left and posted a substantial advance, further impacting demand for the American currency. US Treasury yields retreated, with the yield on the 10-year Treasury note down roughly 15 bps.

The Dow finished +2.7%, the S&P 500 closed +2.6% and the Nasdaq Composite ended +2.3%. The 10-year Treasury yield fell 14 basis points to 3.66% and at one point dropped by 20 basis points. The 2-year yield declined 9 basis points to 4.12%.

Economic Data

Downwardly revised S&P Global Manufacturing PMIs weighed on the EUR. The index’s reading indicated that the economic activity in the US manufacturing sector expanded at a slightly stronger pace in September than it did in August with the S&P Global Manufacturing PMI rising to 52.0 from 51.5. This reading came in better than the flash estimate and the market expectation of 51.8.

The US dollar tried to advance ahead of the US opening, but tepid local data put it back on the bearish path. The ISM Manufacturing PMI contracted to 50.9 in September, barely holding in expansion zone.

Other Developments

Russian gas giant Gazprom PJSC said it suspended its natural-gas deliveries to Italy over the weekend after it didn’t receive authorization for the pipeline flows via Austria. On Monday also, Hungary announced that an agreement is reached to defer payments to Russia’s Gazprom for winter gas supply, a move that could ease pressure on the country’s widening current account deficit and its forint currency.

Financial markets traded with significant optimism, despite persistent recession concerns. Political and financial turmoil in the United Kingdom keeps triggering volatile market reactions and leading the way. The UK government came up with a potential tax cut of a 45% rate on income.

But British Finance Minister Kwasi Kwarteng later said they were dropping the idea. The announcement reinforced the performance of the GBP/USD pair, which ended the day near an intraday high of 1.1333. Following UK news, European indexes reversed early losses and settled in the green territory.

The AUD/USD pair regained the 0.6500 threshold ahead of the Reserve Bank of Australia monetary policy decision. USD/CAD settle near its intraday low at around 1.3630.

Gold soared and flirts with $1,700 a troy ounce, while crude oil prices also advanced. WTI is currently trading at around $83.50 a barrel.

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