Market Drivers – US Session 17/04/2023

On Monday, the US Dollar Index increased for the second day in a row as the chances of the Fed raising rates again at its May meeting increased and the possibilities of a rate cut later in 2023 decreased. Data from the US exceeded forecasts, with the Empire Manufacturing Index reaching a considerable improvement in April of 10.8. The US releases data on housing starts and building permits on Tuesday.

Key Developments

US debt ceiling is back to news headlines. House Speaker Kevin McCarthy traveled to the New York Stock Exchange Monday to deliver a warning to Wall Street about the debt ceiling crisis. On his 100th day as House Speaker, the Republican warned that there is a rising possibility that Washington “will bumble into the first default in our nation’s history,” adding that he wants to sound the alarm for the financial community, which has been downplaying the matter lately. After their initial meeting in February, McCarthy and President Joe Biden fell into a standoff on the matter. Little has been spoken in the past 75 days, and a market-shattering and historically unpleasant debt ceiling dispute may be on the horizon in the coming weeks.

Equity indexes gained ground after a late Wall Street rise. The Nasdaq increased by 0.28%, the S&P 500 increased by 0.33%, and the Dow Jones gained 100 points, or 0.30%. The USD/JPY increased to 134.50, the highest level in more than a month, as a result of the surge in US rates, which led to the curve’s highest finish in weeks.

While declining for a second day in a row, EUR/USD maintained a price over 1.0900. On Monday, the Euro struggled as the EUR/GBP pair’s four-day winning streak came to an end. On Tuesday, the German ZEW Survey is due. The US 2-year Treasury bond yield is the primary influence on the market movement of the EUR/USD because both the US and the Eurozone have a light economic calendar. The US 2-year bond yield is gaining almost 10 bps, sitting at 4.194%, while odds for a 25 bps rate hike by the Fed are seen at 84.7%, higher than last Friday’s 78%.

GBP/USD fell to weekly lows after breaking through the 1.2400 level and eventually found support near the 1.2375 level of the 20-day SMA. The UK will publish employment statistics on Tuesday.

NZD/USD experienced support at the 200-day SMA at 0.6156 and mildly increased after that. The pair is moving with a negative bias, although while above 0.6150, losses appear to be constrained. The AUD/USD rate fell further, falling below the 0.6700 barrier, and is now trading inside a well-known range. The Reserve Bank of Australia (RBA), which recently opted to suspend its tightening cycle, will publish the minutes of that meeting.

A stronger US Dollar and higher US rates caused gold to decline on Monday, reaching a weekly low of $1,980. Silver fell 1.50% and dropped under $25.00. Around 2% of the price of crude oil was lost, with WTI reaching six-day lows around $80.00. Bitcoin saw its steepest dip in a week, dropping to its lowest point in six days at $29,150. Ethereum was trading at $2,085, down 1.75%.

Economic Data

The housing market index for the US National Association of Home Builders (NAHB) increased for the fourth consecutive month in April, rising to 45 compared to the preceding and projected reading of 44.

Data released on Monday in the US showed a sharp rebound in the Empire Manufacturing Index in April to 10.8 from -24.60, surpassing expectations of -18.0. The numbers contribute to the expectations of one more rate hike from the Fed.

What’s Next?

Tuesday will be a busy day in terms of economic data in an overall light week. Early, the Reserve Bank of Australia will release the minutes of its latest meeting and then China will report Q1 growth numbers. Will the US Dollar extend its recovery?

Also Read:

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