Market Drivers – U. S. Session 13-10-2021

Mohamed Abdelhamid 14 October, 2021 4:19 am Commodities, Cryptocurrency, Forex Market, Global Stock Market, Market Update

Consumer Price Index data from the U. S. Labor Department and FOMC minutes represented the key market drivers on Wednesday.

Inflation is still steering the both the U. S. economy and fiscal policy as prices continued their ascent in September. Social Security benefits will rise 5.9% in 2022, the highest in four decades.

The Federal Reserve Bank is setting the scene for gradual tapering around mid-November in order to help the nation’s economy recover from the impact of coronavirus.

The gap between yields on shorter- and longer-term Treasury yields narrowed Wednesday after new data showed consumer prices rose in August. The gap narrowed mainly because Longer-dated Treasury yields moved lower after stronger than expected U.S. inflation data.

Economic Data
Investors are eying Thursday’s Asian session’s key event that will reveal Australia’s jobs data for September. AUD/USD is second whereas the Canadian dollar holds first place on Wednesday in New York closing.

Western Texas Intermediate crude oil benchmark hardly progresses by 0.05%, it is trading at $79.94 during the New York session. The market sentiment improved through the U.S. session, as depicted by U. S. equity indexes rising between 0.01% and 0.65%.

As expected, FOMC minutes have showed that policymakers are ready to begin tapering, a gradual reduction in the pace of asset purchases, aiming to end it in mid 2022. The dollar sold off on Wednesday pushed lower by falling US Treasury yields. The market mood was depressing throughout most of the day.

The deep crisis of Chinese Evergrande Group and major home builders drove debt market risk premiums on weaker Chinese firms to a record high on Wednesday triggering new credit rating downgrades.

The spread on the equivalent high-yield index that the likes of Evergrande are part of surged to a new high of 2,337 basis points. That drove the yield, which reflects how much firms would have to pay to borrow, to 24%.

Other Developments
Russian President Vladimir Putin said on Wednesday that Russia was ready to provide more gas to Europe if requested, rejecting accusations that Moscow squeezes supplies for political motives.

As cold weather is looming during these stagflation times, U.S. consumers expect 30% surge of winter heating bills.

BREXIT was back to news headlines, Wednesday, as The European Union announced its new plan for Northern Ireland will cut customs paperwork by 50% and mean most food products will not need to be checked when arriving from Great Britain.

USD’s weakness was good news for gold prices which posted strong gains in midday U.S. trading Wednesday, hitting 4 week highs. Buy stop orders were hit in the futures markets after key technical resistance levels were penetrated on the upside.

As for the crypto space, cryptocurrency market was said to be double the size of the sub-prime debt in the U.S. on the eve of the financial crisis posing a threat unless urgently regulated according to the Bank of England. On the other hand, the International Monetary Fund (IMF) has issued a warning about the growing risks in the expanding cryptocurrency space, including fraud, excess speculation and potential “runs” on seemingly more stable assets.

Reacting to the Turkish lira’s record lows, three central bank monetary policy committee members were dismissed by Turkey’s President Tayyip Erdogan on Thursday.

The lira weakened to a record low of 9.1900 against the dollar after the publication of this news, recording a loss of 1% on the day. It has weakened about 19% so far in 2021 driven by concerns about the Turkish fiscal policy.

The most important headlines on Wednesday included the following: