Market Drivers – US Session 08/11/2022

Mohamed Abdelhamid 9 November, 2022 2:29 am Forex Market, Market Update

There was no obvious catalyst that specifically brought about the US Dollar’s decline, although the positive performance of US shares and easing government bond yields put pressure on the dollar after Wall Street’s opening. The yield on the 2-year Treasury note touched an intraday low of 4.65% after peaking at a multi-year high of 4.80% on Friday. It later recovered to settle just below the 4.70% level. The Dow Jones Index rallied for a third consecutive day, but the S&P500 and the Nasdaq Composite posted modest gains.

Financial markets started the day in cautious mood due to lack of relevant news and ahead of the release of US inflation figures. The US Dollar posted a modest intraday comeback but finished the day falling to monthly lows against most of major rival currencies.

Economic Data

Coinciding with election day, the monthly IBD/TIPP Economic Optimism Index, a leading national poll on consumer confidence, dropped for the second straight month, moving from 41.6 in October to 40.4 in November– a change of 2.9%. This kept the index in negative territory for the 15th consecutive month. A reading above 50.0 signals optimism and below 50.0 indicates pessimism on IBD/TIPP indexes.

Significant Developments

The results of the US midterm elections would take two days. Elections result will have long-lasting effects on the American dollar, mainly if Democrats are not able to keep in control of both houses. Republicans do not need much to seize control of Congress. If that is the case, GOP representatives will oppose Biden’s massive expenses, which would exacerbate the risk of an economic downturn. Equities will likely collapse, and it does not seem the dollar could benefit much from it.

The EURUSD pair neared 1.0100 and holds on to gains ahead of the US close, despite some discouraging news. A new chapter of the European energy crisis was written after the European Commission said there is no way to create a gas price cap as requested by EU leaders at the end of October.

The GBP/USD pair benefited from the broad dollar weakness also from Bank of England Chief Economist Huw Pill, who said the central bank has more to do on tightening the monetary policy. The pair trades around 1.1550.

The USDJPY pair edged sharply lower, now trading around 145.50. The Japanese cabinet approved a second supplementary budget spending worth 29.1 trillion yen for this fiscal year to fund an economic stimulus package. Meanwhile, AUDUSD hovers around 0.6510 while USDCAD trades in the 1.3420 price zone.

Gold soared and reached levels last seen in September. The bright metal trades around $1,714 a troy ounce. Crude oil prices, on the other hand, were sharply down, with WTI now trading at around $89.40 a barrel.

There is noise in the crypto space amid the collapse of FTX and Binance’s decision to save the crypto exchange. Bitcoin plummeted to $18,355, a fresh 2022 low.

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