Market Drivers – US Session – July 17

After data on China’s economic growth disappointed, shares of energy companies dropped as oil futures started the week poorly. WTI was down some 1.5% at $74.00 from $76.05. Crude oil prices posted moderate losses on weaker-than-expected Chinese economic data and the restart of crude oil production in Libya as protesters left oilfields.

Economic Data

In the second quarter, China’s GDP increased 6.3% year over year, falling short of estimates for 7.1% growth. Disappointment with China’s recovery once the harsh Covid-19 regulations were lifted.

The US July Empire manufacturing survey of general business conditions index fell -5.5 to 1.1, stronger than expectations of -3.5.

Key Developments

Bitcoin was weaker and fell below the $30k mark on regulatory worries.  Meanwhile, The DXY index travelled between 99.753 and 100.181. The US Dollar index experienced modest losses after hawkish comments from the ECB‘s Governing Council member and Bundesbank President Nagel while lower Treasury yield also weighed.

There was an initial bid in the Dollar due to the stronger-than-expected July Empire manufacturing survey and weaker-than-expected Chinese growth numbers for the second quarter along with a disappointment in the June Retail Sales data.

EUR/USD subsequently hit a 16-1/2 month high at 1.1249 while ECB’s Nagel, said, “I expect the ECB will raise interest rates later this month by 25 bp” as core inflation in the Eurozone is “very sticky” but “for the September meeting, we will see what the data will tell us.”

He added, “the economic recovery in the future course of the year could be somewhat more hesitant than expected in the June forecast, and core prices will probably stay very high over the summer.

GBP/USD fell for a second day and is making a correction of the recent rally. GBP/USD travelled between a low of 1.3087 and 1.3108 in a tight range. Market expectations of further interest-rate rises from the Bank of England combined with a resilient UK economy have been supported the Pound Sterling of late.

This week will reveal UK inflation and Retail Sales as the key events along with the four by-elections that are likely to get some attention.

The Bank of Japan may refrain from ending its stimulus measures or changing its yield-curve control policy. The BoJ Governor Ueda said not much has changed on bond market functionality from the BOJ’s last policy meeting in June.  

Precious metals prices on Monday closed moderately lower as the risk-on sentiment on Wall Street took away the appeal for both gold and silver. Additionally, the worries over Chinese demand for industrial metals were a factor, more so for silver.

Weaker inflation is expected to play a role in Fed’s upcoming policy decision, and July could bring good news for the yellow metal that is expected to solidify in a higher range.

Australia will release The Reserve Bank of Australia minutes that could offer a few insights for the August rate decision, with the governor Phillip Lowe recently signalling that the RBA is taking a data-dependent approach.

Later on the day, in the US, Retail Sales will be a focus which may have advanced for a third consecutive month in June and such an outcome would be expected to support the US dollar.

Also Read:

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GBP/USD retreats on Chinese economic concerns

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Why could gold break into all-time high in 2024?

Noor Capital | Interview with Muhammad Hashad on Dubai TV – July 17, 2023