Market Drivers – US Session – 10/05/2023

China has reportedly informed the United States that there is little chance of a meeting between the countries’ defense ministers at a security forum in Singapore due to a dispute over sanctions. This news challenges market sentiment and weighs on the risk-barometer pair like AUD/USD which remains pressured around 0.6775 after posting multiple failures to cross the 0.6800 mark.

Economic Data

Consumer inflation in the US measured by the Consumer Price Index (CPI) ticked lower in April to 4.9% from 5% in March. The Fed Funds rate at 5.00%-5.25% is now above the annual CPI. Inflation trends in the US continue to head the right direction, but still have a long way to go before they reach the Fed’s 2% target.

Key Developments

The US Dollar initially dropped but then trimmed losses, ending the day lower amid lower US yields. The US Dollar Index closed around 101.40, as it remains above the key support of 101.00.

The US 10-year Treasury yield settled at 3.43% and the 2-year at 3.90%, after reversing from near 4.10%. More US inflation data is due on Thursday with the Producer Price Index (PPI) and the weekly Jobless Claims report. The debt ceiling impasse continues despite warning about the situation and its unnecessary costs.

EUR/USD peaked above 1.1000 but then pulled back. The Bank of England (BoE) will announce its decision on monetary policy on Thursday. Gold spiked after US CPI but then pulled back, stabilizing around $2,030. Silver reversed from five-day highs near $26.00, falling under $25.50. Crude oil prices dropped 1%.

On Thursday, the Bank of Japan will release their summary of opinion from Ueda’s first meeting, New Zealand will release the Food Price Index for April, in Australia attention would be on Melbourne Institute’s Inflation Expectations survey and Westpac’s Consumer Confidence. China will release April’s inflation data. Markets will continue to digest US inflation data ahead of the PPI.

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