Market Drivers – US Session 08/03/2023

Mohamed Abdelhamid 9 March, 2023 3:56 am Forex Market, Market Update

The US economy expanded marginally from January through late February, and price rises persisted widely, according to the Federal Reserve’s Beige Book released on Wednesday. However, businesses said that inflation has moderated and that they anticipate it to do so throughout this year.

The Federal Reserve Bank of New York created this report using data gathered on or before February 27, 2023. Even while price rises slowed down in many districts, there was still widespread inflationary pressure.

After leaving the door open to a rate hike of 50 basis points at the March meeting, Fed Chair Jerome Powell did not shock the markets, and the US dollar soared to monthly highs.

The dollar recovered Wednesday after a slight decline. A challenge of the recent highs during the Asian session seems plausible if the Dollar’s momentum continues. Inflation data from China and a fresh Q4 GDP estimate from Japan will be released.

Economic Data

According to Automatic Data Processing (ADP), private sector employment increased by 242K in the US in February, above forecasts of 200K. According to the US Bureau of Labor Statistics (BLS), there were 10.8 million job opportunities in January, which was somewhat more than the 10.6 million expected by the market.

The data continue to point to a tight labour market, which supports the Fed’s hawkish stance and benefits the US dollar. The weekly Jobless Claims report is due on Thursday. The non-farm payrolls on Friday and the consumer price index for the following week are anticipated by the market.

Key Developments

The Bank of Canada kept interest rates unchanged and signaled it will continue on pause. As a result, the Loonie fell across the board. USD/CAD rose to four-month highs above 1.3800.

Governor of the Reserve Bank of Australia Philip Lowe stated that the central bank’s decision on whether to raise interest rates again or take a break will be based on newly released data. His remarks reaffirmed the monetary policy discussion on Tuesday. The AUD/USD pair recovered after falling to a new four-month bottom, but it was unable to hold above 0.6600 and is still under pressure.

Crude oil prices kept going south, hitting fresh weekly lows. Cryptocurrencies oscillated between gains and losses on Wednesday. Bitcoin is moving around $22,000, while Ethereum around $1,560.

Following the broad selloffs on Tuesday, markets have partially stabilized, but risk aversion still reigns. Together with the US dollar, US Treasury yields decreased before rising back to Tuesday’s highs. The US 10-year yield stabilized at around 3.97%, and the 2-year rate increased once more to over 5%.

The EUR/USD climbed to 1.0575 before falling below 1.0550. Despite mixed data from the Eurozone, market participants are looking to a higher terminal rate from the European Central Bank, supporting the Euro.

GBP/USD is still under pressure even if it is trading close to but above the important 1.1800 level. The EUR/GBP rate is around 0.8990. Swati Dhingra of the Bank of England demanded that interest rates remain unchanged.

USD/JPY recorded a closing above 137.00 but was also below the 200-day Simple Moving Average and distant from the daily high. The Bank of Japan will make its monetary policy announcement on Friday.

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