Market Drivers – US Session, January 3, 2024

Mohamed Abdelhamid 4 January, 2024 1:41 am Commodities, Forex Market, Market Update

The US dollar is still seen favourably at the start of the new trading year. Asian markets should closely monitor the Chinese schedule going forward, since Caixin Services and Composite PMIs are due on that calendar. While there is nothing planned in Oz for Thursday, the final Manufacturing PMI watched by Jibun Bank is due in Japan.

Due to the persistent selling tendency in the risk-averse market, the US Dollar Index (DXY) rose to about the three-week highs of 102.70. Furthermore, US rates increased to multi-week peaks across a range of maturities, supporting the positive outlook for the dollar at the same time.

US stocks probed the area of multi-day lows, extending the corrective move after hitting a new all-time high just below the 38000 yardstick when gauged by the reference Dow Jones.

Economic Data

Data released on Wednesday showed an improvement in the always relevant US ISM Manufacturing PMI to 47.4 in the last month of 2023, while the labour market gauge of JOLTs Job Openings missed estimates at 8.79M in November, showing further cooling of the US labour market prior to key releases of the ADP and weekly Initial Jobless Claims (Thursday) and the December Nonfarm Payrolls (Friday).

Key Developments

GBP/USD was a kind of exception after revisiting the upper-1.2600 amidst decent gains and following three consecutive sessions of losses.

EUR/USD sank to the sub-1.0900 region for the first time since mid-December against the backdrop of the stronger greenback and generalized weakness in the risky assets.

Another negative session for the Japanese yen saw USD/JPY climb to the 143.70 region on the back of the continuation of the upside momentum of US yields and a directionless patter in JGB 10-year yields.

AUD/USD remained well on the defensive and retreated for the fourth session in a row against the backdrop of further pressure surrounding the high-beta currencies and the generalized bearish session in the commodity complex.

Speaking about the commodity universe, the Canadian dollar lost ground for the fifth consecutive session, lifting USD/CAD to the 1.3370 zone, or two-week highs.

The intense move higher in the greenback and US yields weighed on gold and sponsored a drop to multi-day lows near $2030 per ounce. In the same line, silver prices added to the pessimistic start of the year and broke below the $23.00 mark per ounce to clinch a new two-week lows.

The “No News” message from the FOMC Minutes left the positive momentum for the US Dollar unchanged after the committee’s belief that rates are nearing their peak cycle and projections indicating a lower rate by 2024 were already widely anticipated. Moreover, some participants expressed the view that it may be necessary to maintain the policy rate at its current level for a longer period than initially anticipated.

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