Market Drivers – US Session 03/03/2023

The US dollar declined on Friday and dropped for the week. The Dollar Index remained in negative territory as a result of encouraging news from China and falling US yields. American stocks experienced weekly gains following February’s significant losses. After good performance in February, the dollar experienced its first weekly loss in a month as a result of the improvement in market confidence.

Despite increased yields, gold had its strongest week since January, rising from two-month lows to around $1,850. Since Monday, the price has risen steadily. Silver recovered from four-month lows and broke back above the $21.00 level to snap a six-week losing run. The bond market continues to pose a significant risk in both directions, despite the fact that the prognosis for metals has improved.

Oil prices increased by almost 4% for the week. Following a 3% decline on Thursday, prices increased over 2% on Friday as a result of news that the United Arab Emirates (UAE) is considering leaving the Organization of the Petroleum Exporting Countries (OPEC) (OPEC). The most recent set of economic activity statistics from the US and China helped prices maintain above year-to-date lows, but not by enough to lift WTI back above $80.00.

Economic Data

The US session was plentiful in terms of Fed speaks, rare in terms of macroeconomic data. For the first time since August, American energy companies this week reduced the number of working oil and natural gas rigs, according to widely watched data from energy services provider Baker Hughes Co (BKR.O).

An early predictor of future output, the oil and gas rig count dropped by four to 749 in the week ending March 3, the lowest since June. Despite a drop in the number of rigs this week, Baker Hughes reported that the total count was still up 99 rigs, or 15%, from the same period last year.

Key Developments

The EUR/USD pair experienced its best week since early January thanks to a small weekly increase. The recovery started from the 20-week SMA and was stopped below 1.0700. Data on inflation in the eurozone led to a drop in European bonds. The Euro benefited from rising EZ rates.

For the Pound, the benefits of the agreement between the United Kingdom and the European Union were transient. GBP/USD maintains its sideways movement, held up at 1.1900, and is unable to reclaim 1.2000. EUR/GBP made a comeback and retreated to 0.8850.

Despite increased rates, the Japanese Yen ended the week in a mixed bag. USD/JPY is facing a strong resistance around 137.00. EUR/JPY posted the highest weekly close since November, but it was far from the highs below 145.00.

New Zealand’s dollar outperformed all other major currencies. The Reserve Bank of New Zealand increased the OCR by 50 basis points to 4.75% back in February, foreshadowing upcoming increases. NZD/USD increased following four weekly declines, although it was still unable to surpass the 20-day SMA at 0.6260.

The Chilean Peso (CLP) and the Mexican Peso (MXN), two of the world’s most traded currencies, had the highest gains this week. For the first time since 2018, USD/MXN fell under 18.00.

Yields remain relevant for currencies, with the US 10-year at 4% and the German 10-year at 2.70%, the highest weekly close since 2011. Bond market volatility is expected to continue next week.

The stronger dollar and higher equity prices did not help cryptocurrencies. Due to problems with Silvergate, Bitcoin dropped more than 4% on Friday, to its lowest point in four weeks.

Next Week

A hectic week that will bring new information, interest rate decisions, and new guidelines from central banks may begin quietly. Tuesday’s Reserve Bank of Australia meeting is projected to result in a 25 basis point rate increase, while the Bank of Canada will meet on Wednesday. On Tuesday and Wednesday, Fed Chair Powell will testify before Congress regarding the Semiannual Monetary Policy Report. Tuesday, China will release data on trade and inflation next Thursday.

The Non-Farm Payrolls report and the employment statistics for Canada will be released on Friday, which will be a crucial day. China’s annual “Two Session” (parliamentary gathering) begins over the weekend. The Chinese government will publish its GDP objective and codify its official titles.

Also Read:
Bitcoin falls on Silvergate-linked Worries

USD/JPY retraces toward 136.00 on weaker dollar

Is UAE leaving OPEC? What impact has this news had on crude oil prices?

Fed Policy Report: Ongoing increases in fed funds rate target are necessary

Gold Index declines from two-week highs post-US ISM Service PMI