Market Drivers – US Session – 12/06/23

Mohamed Abdelhamid 13 June, 2023 3:00 am Forex Market, Market Update

US equities opened the trading week with positive performance ahead of key US economic data and monetary policy events. Markets cheered the possibility of the Fed’s ending its rate hike cycle. Incoming economic data will be crucial, with the CPI reading, in particular.

The Dow Jones gained 0.56% and the Nasdaq climbed 1.53%. US Treasury yields pulled back during the American session and ended the day modestly lower.

Gold found support at $1,950 on Monday and trimmed losses during the Asian session, rising to $1,960. Silver lost 0.95% and finished around $24.00. Cryptocurrencies performed mixed, with Bitcoin losing 1%, falling below $36,000.

Key Economic Data, Events

The Fed begins its two-day meeting on Tuesday. On Wednesday, the central bank is expected to hit the pause button; however, some analysts warn that another 25 basis points seem possible.

The key report on Tuesday will be the US Consumer Price Index (CPI), which is expected to have risen 0.2% in May and 4.1% from a year ago, down from 4.9%; the Core CPI is seen advancing 0.4% in the month and 5.3% from a year ago, compared to the 5.5% of the previous month. Those numbers will be critical for expectations regarding the Fed’s monetary policy.

Key Developments

The US Dollar Index rose marginally on Monday, ending above 103.50. It is moving without a clear direction, still above the 103.30 support.

EUR/USD hit fresh weekly highs but then pulled back, settling around 1.0750. The pair is moving sideways, awaiting fresh data and ahead of the European Central Bank (ECB) meeting on Thursday. On Tuesday, Germany and Spain will report the final reading of the Consumer Price Index for May, which should not show surprises. The German and Eurozone June ZEW Survey are also due.

GBP/USD ended a positive three-day streak, falling sharply. It managed to recover above 1.2500 during US hours. The Pound lagged despite hawkish comments from Bank of England (BoE) officials. EUR/GBP had the best day in weeks, rebounding from monthly lows to 0.8600. The UK will release employment data on Tuesday. The Unemployment Rate is expected to rise from 3.9% to 4% in the three months ended in May. BoE Bailey testifies to the House of Lords.

USD/JPY continued to move sideways around 139.50, as it has been the case since the beginning of the month. With the Fed and the Bank of Japan meetings ahead, the current range between 138.50 and 140.00 will be challenged.

AUD/USD rose for the third consecutive day, posting the highest daily close in a month at 0.6750 as the Aussie outperformed. The Westpac-Melbourne Institute Consumer Sentiment (June) is due on Tuesday, and the National Australia Bank Monthly Business Survey (May) will be released.

NZD/USD is facing resistance at the 200-day Simple Moving Average (SMA) at 0.6120. The pair is moving with an upside bias, but some exhaustion signs are seen. The next move will likely be USD-dependent. New Zealand migration data is due on Tuesday.

USD/CAD rebounded from the important support area above 1.3300 to 1.3385/90. The bias is to the downside, but the Loonie needs to break under 1.3300 to clear the way to more gains. The 4% decline in crude oil prices weighed down the Canadian Dollar which lagged on Monday.

What To Watch:
During Tuesday’s Asian session, New Zealand will report April visitor arrivals. The Westpac Australian Consumer Confidence Index for June, and the NAB Business Survey for May are due. The key event of the day will be the US Consumer Price Index, which will offer critical data ahead of Wednesday’s FOMC decision.