Market Drivers – US Session 23/09/2022

Mohamed Abdelhamid 24 September, 2022 3:33 am Forex Market, Market Update

After FOMC had turned more hawkish on Wednesday, several waves began to sweep across financial markets on Thursday and also on Friday. Some major central banks are not able to cope with the Fed, this is why the US dollar is soaring and continues to strengthen with the Dollar Index sitting at 113.02 at the time of writing. Economists even forecast broad dollar strength against most G10 currencies throughout the end of 2022.

Has the Fed entered the danger zone? In terms of the rate shock policymakers are tossing onto the US economy, Global S&P PMIs released in the EU, UK, and the US triggered anew investors’ recession fears, increasing appetite for the US dollar which enjoys the safe-haven status, with the US Dollar Index sitting at 112.990, up by 1.55%, after hitting the YTD high at 113.228.

The phrase “danger zone” has jumped to economic news headlines, not only while talking about slowdown and recession woes, but also when talking about price actions including important assets such as oil, the Pound Sterling and gold. On Friday, WTI nosedived to new eight-month-lows, below $79 per barrel. at the time of writing oil is trading at $78.74 versus Thursday’s closing price at $83.49 per barrel.

Economic Data

The data published by S&P Global showed on Friday that the business activity in the US manufacturing sector expanded at a stronger pace in early September than in August with the Manufacturing PMI rising to 51.8 from 51.5. This reading came in better than the market expectation of 51.5.

Further details of the monthly publication revealed that the Services PMI rose sharply to 49.2 from 43.7 and the Composite PMI improved to 49.3 from 44.6.

Other Developments

Gold price stumbled to thirty month low at $1638.90 on Friday before it turned back to trade at $1643 per ounce at the time of writing versus Thursday’s closing price at $1670.95. Volatility in the markets and dramatic FX plays did not leave gold untouched as the precious metal fell another 1.7% this week.

At a cost of 45 billion pounds ($50 billion) by the financial year 2026/27, the new package was the largest at a single event since 1972, according to the Institute for Fiscal Studies. Income tax cuts, a drop in property taxes, tax-free shopping for overseas visitors and the scrapping of a planned corporation tax rise are all aimed by the government to give UK households and businesses a push forward.

The British government bond yields surged by the most in one day in over three decades on Friday, the pound slid to a fresh 37-year against the American dollar after UK finance minister Kwasi Kwarteng laid out a series of tax cuts in a move that is meant to boost economic growth. At the time of writing, one US dollar is equal to 0.9201 pounds.

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