Market Drivers – US Session 08/02/2023

Mohamed Abdelhamid 9 February, 2023 4:10 am Forex Market, Market Update

The GBP/USD pair trades around 1.2070, holding on to modest intraday gains. The Euro is one of the weakest rivals of the US dollar. The shared currency is trading at 1.0716 as ECB policymakers repeated their hawkish language. ECB’s Klaas Knot said that headline inflation appears to have peaked but added that keeping the current pace of hikes into May could be needed if underlying inflation does not materially abate.

The US dollar ended Wednesday with mixed performance, as the optimism fueled by Jerome Powell weakened on the day. European stock indexes managed to post modest advances, but Wall Street settled in the red territory.

Key Developments

WTI crude futures are struggling to extend their upside path above the immediate resistance of $78.50 in the early Tokyo session. The oil price is expected to continue its upside as investors have ignored the hawkish stance from Federal Reserve (Fed) chair Jerome Powell and his teammates on interest rates. On Wednesday, however, crude oil prices maintained the positive momentum, and WTI currently trades at $78.40 a barrel

The US treasury yields are steady around Tuesday’s closing levels, limiting the dollar’s strength. Across the pond, Fed Governor Lisa Cook said that the policymakers focus on restoring price stability, as inflation is still running too high, adding that that they would need a restrictive monetary policy for some time.

Fed’s John Williams said that the labour market is still very strong and noted that they have more work to do on rates, adding data will determine the path of rate hikes. Finally, Christopher Waller warned that interest rates could go higher than expected.

The Bank of Canada published the newly inaugurated Minutes of its latest monetary policy meeting- The document had no impact on the CAD as the BOC signaled a pause in rate hikes after announcing their decision. USD/CAD trades at around 1.3430.

AUD/USD is down to 0.6920 as the poor performance of Wall Street weighed on the pair. Finally, USD/JPY advanced, now hovering around 131.40.

Gold prices peaked at the beginning of the day at a fresh weekly high of $1,886.31 but quickly retreated, now trading at around $1,874.77..

Economic Data

The US Energy Information Administration reported an inventory build of 2.4 million barrels for the week to February 3. This comes after three weeks of inventory builds, two of them quite substantial. At 455.1 million barrels, US crude inventories are about 4 percent above the five-year average for this time of the year.

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