Market Drivers – US Session 06/02/2023

Mohamed Abdelhamid 7 February, 2023 2:22 am Forex Market, Market Update

The US Dollar extended its Friday rally to fresh February highs against most major rivals, fueled by a dismal market sentiment. Investors and traders will be all ears as Fed Chair Jerome Powell delivers his speech on Tuesday. Bond yields continued to surge on Monday as traders assess the possibility that the Fed will postpone any talk about rate cuts until later in the year after Friday’s very strong jobs report.

US Treasury yields advanced. The 10-year note currently yields 3.63%, up 10 bps, while the 2-year note offers 4.43%, up 13 bps. Stock markets, on the other hand, trade in the red, WITH US indexes losing some ground after their European counterparts settled in the red.

Spot gold bottomed at $1,860.20 a troy ounce, a fresh one-month low, bouncing modestly to end the day at $1,866. Crude oil prices fell intraday but managed to recover some ground. WTI posted a modest intraday advance and settled at $74.30.

Key Developments

Political tensions between Washington and Beijing impacted the market sentiment, the demand for the US dollar increased accordingly on the back of the surveillance balloon incident. Diplomatic relations between China and the United States were temporarily interrupted as Washington postponed Secretary of State Blinken’s trip to China.

The EUR/USD pair fell to 1.0708, bouncing towards the current 1.0720 price zone but ending a third consecutive day in the red. Poor EU data further weighed on the Euro.

GBP/USD trades around 1.2020. Earlier in the day, Bank of England Chief Economist Huw Pill said that UK policymakers are prepared to do more to get inflation back to target, as chances of inflation getting embedded in the United Kingdom are higher than in Europe.

Economic Data

Germany published December Factory Orders, which fell by 10.1% YoY, much worse than anticipated. On the other, Euro Zone Retail Sales fell by 2.7% MoM in January and by 2.8% compared to a year earlier.

The AUD/USD pair trades around 0.6880 ahead of the Reserve Bank of Australia’s monetary policy decision. The Canadian Dollar edged sharply lower, with USD/CAD now hovering at around 1.3440.

The USD/JPY pair gapped higher at the weekly opening, and the gap remains unfilled. The pair currently trades at around 132.50, with eyes on a potential pullback to 131.20.

Canada Ivey PMI improved at a much stronger pace than expected in January. The USD/CAD pair continues to trade in positive territory near 1.3450. The Ivey Purchasing Managers Index (PMI), an economic index which measures the month-to-month variation in economic activity in Canada, climbed to 60.1 (seasonally adjusted) in January …

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