Market Drivers – US Session – 11/07/2023

Mohamed Abdelhamid 12 July, 2023 3:35 am Forex Market, Market Update

The US Dollar weakened during the US trading session ahead of the key CPI data in the United States. On Wall Street, the Dow Jones gained 0.93% and the Nasdaq rose 0.55%. Gold rose to $1,940, while Silver finished flat around $23.10. Crude oil prices rose more than 2%.

The improvement in risk sentiment weighed on the dollar. The Dollar Index dropped for the fourth consecutive day and closed at 101.65, the lowest in two months.

Awaited Economic Data

As market players awaited the release of critical US data, price movement remained muted. The crucial event will be the publication of the June CPI figures. The index is predicted to rise by 0.3% every month, with the annual rate falling from 4% to 3.1% and the core annual rate falling from 5.3% to 5%. The Federal Reserve’s expectations for the July 25–26 FOMC meeting will be greatly influenced by the data, which is anticipated to cause volatility throughout financial markets.

Market Developments

GBP/USD reached fresh 15-month highs above 1.2900 and rose again. Labor data from the UK was mixed, with the unemployment rate rising to 4.0% in May, while wage growth rose 6.9% YoY, marking a new high.

USD/JPY slid further and approached 140.00, even as US yields remain steady and despite risk appetite. A higher-than-expected US inflation reading could boost the pair on Wednesday.

The EUR/USD pair hit a fresh high at 1.1025 and then pulled back modestly, ending the day above 1.1000. The key driver continues to be the weaker US Dollar.

AUD/USD remained in range, moving below 0.6700 and supported by 0.6600. On Wednesday, Reserve Bank of Australia Governor Lowe will deliver a speech following the decision of the central bank to keep rates unchanged last week.

USD/CAD resumed its decline and fell below 1.3250, under the 20-day Simple Moving Average (SMA). The Bank of Canada is expected to announce its interest rate decision, and a 25 basis point hike to 5% is expected. The BoC will likely keep its forward guidance open-ended.

NZD/USD found resistance again at the 0.6220 area and pulled back, below 0.6200. The Reserve Bank of New Zealand will announce its decision on Wednesday. The central bank is expected to keep rates unchanged for the first time in more than a year.

What to watch on financial markets

During the Asian session, the Reserve Bank of New Zealand will announce its monetary policy decision and RBA Governor Lowe will deliver a speech.

The Bank of Canada is set to announce its Interest Rate Decision on Wednesday, July 12 at 14:00 GMT. The BoC is expected to hike rates by 25 basis points (bps) to 5.00%, contrary to its pause hints1. The decision will be published alongside a Monetary Policy Report, containing updated economic and inflation projections.

The key event of the day, however, will be the release of the June US CPI, which is likely to trigger volatility across financial markets.

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Bank of Canada expected to hike by 25 basis points