Market Drivers – US Session 12/04/2023

Stock losses accelerated Wednesday afternoon when the minutes of the Mar 21-22 FOMC meeting showed policymakers projected a “mild recession” starting later in 2023.

The minutes of the FOMC meeting on March 21–22 revealed that policymakers reduced their forecasts for rate increases this year, noting that “many participants had lowered their assessments of the federal funds rate target range that would be sufficiently restrictive given the likely effects of recent banking-sector developments on economic activity and inflation.”

The most important report for the Asian session is the March Australian Employment. Data on China’s trade balance will be released. The Producer Price Index will provide additional US inflation statistics on Thursday. The US Dollar Index is under stress and recorded its worst daily finish on Wednesday since early February.

Economic Data

A 0.1% increase in the US Consumer Price Index (CPI) in March fell short of expectations for a 0.3% increase, and the annual pace decreased to 5%, the lowest level since May 2021. The Core rate, however, increased somewhat from 5.5% to 5.6% YoY. The bond market is still betting on rate cuts by the end of 2023 despite the fact that Core inflation remains persistent, even though there is still a chance for another rate hike at the final FOMC meeting in May. The US Dollar is hampered by the drop in US yields.

Key Developments

After reaching a peak at 0.6723, the AUD/USD pair fell back below 0.6700. On Thursday, Australia will announce its March employment figures. According to the market, there were 20,000 more jobs added than expected.

As anticipated, the Bank of Canada maintained interest rates at 4.5% while making no significant adjustments to its forecast. BoC Governor Macklem stated that no significant contraction is anticipated. On Thursday, he will make another speech at the Spring Meetings of the International Monetary Fund. Inching closer to April lows, USD/CAD declined for the second day in a row, dropping below 1.3450.

The US Dollar Index dropped to 101.50 and posted the lowest daily since February. More US inflation data is due on Thursday with the Producer Price Index. The weekly Jobless Claims report is also due. EUR/USD jumped to the 1.1000 area but could not break above, while EUR/GBP rose above 0.8800. Expectations of more rate hikes from the European Central Bank (ECB) continue to offer support to the Euro.

GBP/USD gained ground for the second day in a row, and is back near the 1.2500 area, with a bullish outlook. UK GDP data and Industrial Production and Trade Balance are due on Thursday.

USD/JPY ended a positive streak and bottomed at 132.70. It rebounded during the American session above 133.00 but the short-term outlook remains bearish. NZD/USD rose modestly and retook 0.6200 as the Kiwi lags again. AUD/NZD rose above 1.0750, to weekly highs.

Bitcoin peaked above $30,500 after US CPI data but then pulled back, retreating to $29,800. Gold price peaked near $2,030 and then pulled back to $2,000 to end a volatile session around $2,015. Finally, silver broke decisively above $25.00.

Also Read:

Oil prices soaring on softer US data as $90.00 targeted

USD/CHF falls on weaker US dollar post-CPI data

BoE´s Bailey: Banking crisis testing institutional structures

US stocks drop post-FOMC Minutes, signals of a mild recession

G7: Financial System Is Robust

EUR/USD traders await FOMC minutes for direction

Gold shines post CPI reading, anticipated to continue shining