Market Drivers – US Session 23/11/2022

The US dollar fell further as an immediate reaction to the FOMC minutes. On the other hand, all US indexes picked up an upward pace. Chances of a 50 bps hike rose to 79% following the release time.

The dollar retreated on Wednesday under selling pressure and finished the day sharply down against all major rival currencies. The dollar got hit by poor growth-related data as well as the more dovish FOMC minutes.

Commodity-related currencies benefited from the market’s positive mood particularly as regards global stocks. Asian and European indexes closed in the green, while US indexes gained upward momentum after FOMC Meeting Minutes. AUD/USD trades around 0.6730 while USD/CAD declined towards the 1.3360 price zone.

Safe-haven currencies were among the best performers against the US Dollar. USD/CHF is down to 0.9420, while USD/JPY trades around 139.45. Spot gold remained subdued for most of the day, jumping above the $1,750 mark late in the US afternoon, retaining its intraday gains.


Economic Data

S&P Global published the preliminary estimates of its November PMIs. The EU figures were better than anticipated but remained within contraction levels. US indexes, however, disappointed big, triggering the first bout of dollar selling. EUR/USD trades near the 1.0400 figure ahead of the close.

U.S. Treasury yields declined Wednesday after some weak economic data. U.S. jobless claims increased more than expected last week, Labor Department data showed on Wednesday. Meanwhile U.S. business activity contracted for a fifth straight month in November, according to the S&P Global flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors.

The United States Census Bureau announced on Wednesday that new orders for manufactured durable goods increased in October, despite persistent inflation and global economic instability.

Other Developments

FOMC minutes have showed that majority of Fed policymakers agreed that a slower pace of interest rate hikes would be appropriate soon, despite the risk on the impact of high inflation on the growth of the US economy. Policymakers also believe the monetary policy is approaching a “sufficiently restrictive” level.

The ECB could slow the pace of interest rate hikes from December and send a clear message that 75-basis-point increases are not the norm, as inflation is likely to peak this quarter according to ECB policymaker Mario Centeno.

Crude oil prices, on the other hand, edged lower, with WTI trading at around $77.80 a barrel. The black gold fell despite the US Energy Information Administration reporting inventories of oil were down by 3.7 million barrels over the week ended November 18. Speculations of upcoming sluggish demand, particularly due to the COVID situation in China, weighed on oil prices.

BoE’s Chief Economist Huw Pill said on Wednesday that further policy action will likely be required to ensure that inflation returns sustainably to the 2% target. Pill further added that he does not anticipate raising bank rate to levels priced by markets ahead of the November monetary policy report.

The GBP/USD pair hovers around 1.2050, holding on to most of its intraday gains. UK S&P Global PMIs were better than anticipated but signal persistent economic contraction in the country. Market is paying little attention to Brexit-related headlines, but it seems the issue is making yet another comeback. Finally, the UK Supreme Court rules against Scotland’s bid to hold a new independence referendum.

The US celebrates Thanksgiving on Thursday, which means action across financial markets will be limited ahead of the weekend.

Also Read
Stocks surge after pivot signals by FOMC minutes

EUR/USD surges on FOMC minutes

FOMC Minutes: Most Policymakers Supported Slowing Rate Hiking Pace Soon

NZD/USD rallies ahead of FOMC minutes

FOMC Minutes to reveal how big support for higher peak rate could be

US stocks slightly surge ahead of FOMC minutes

Gold looks cautious ahead of FOMC minutes

US New Home Sales Rise Above Estimates

Gold surges on Fed’s pivot signals by FOMC minutes