Market Drivers – US Session – 12 January

Mohamed Abdelhamid 13 January, 2022 5:19 am Commodities, Forex Market, Global Stock Market, Market Update

US stocks rallied, although indexes gave up gains unevenly ahead of the close, while government bond yields ticked lower, sending the American dollar in a selling spiral, exacerbated by the breakout of technical levels.

The EUR/USD pair trades at its highest in two months at around 1.1450, while GBP/USD jumped to 1.3710, its highest since October. Commodity-linked currencies were also on the run, with AUD/USD trading in the 0.7280 region as USD/CAD flirting with 1.2500.

Economic Data
The US dollar dropped following the release of US inflation CPI data. The December Consumer Price Index was confirmed at 7% YoY, as expected, while the core reading beat expectations, up to 5.5%. The news, which usually spurs risk aversion, had reverse impact this time.

Energy commodity prices increased by 59% in 2021 according to latest data by the US Energy Information Agency. Prices increased because of higher demand and a range of other factors. By the end of 2021, commodities on the energy index traded 59% higher than they did on the first trading day last year on the S&P Goldman Sachs Commodity Index (GSCI), the EIA reports.

In 2021, the energy index comprised 54% of the GSCI, with the two crude oil benchmarks, the West Texas Intermediate (WTI) and Brent, accounting for approximately 70% of the energy index. WTI crude oil accounts for the largest share of the overall GSCI of more than 21%.

The number of building consents issued for new dwellings in New Zealand rose 0.6 percent month-over-month to 4,206 in November of 2021, following a downwardly revised 2.1 percent fall in the previous month.

In the year ended in November 2021, the actual number of new dwellings consented was 48,522 up 26 percent from the November 2021 year.

Other Developments:
US President Biden on Wednesday has insisted that his administration is “making progress” on inflation, despite data showing it continued to grow last month for an annual jump of 7 percent, the highest increase since 1982.

The White House highlighted falling fuel costs in December and lower overall monthly increase of .5 percent for common goods and services, versus .8 percent in November 2021, while the cumulative annual increase grew from 6.8 percent.

The President and CEO of the Federal Reserve Bank of San Francisco Mary Daly has stated that the Federal Reserve Bank does not want to get too far ahead on calling a number of rate increases.

Earlier during Wednesday’s session, Fed Board of Governors’ member and incoming Vice Chairman of the FOMC Lael Brainard recently crossed wires while saying, “Returning inflation to the 2% target is the most important task facing the US central bank.”

The FOMC member said in remarks prepared for delivery on Thursday to a Senate panel considering her for promotion to the vice-chair position, per Reuters.

According to Federal Reserve Bank of St. Louis President James Bullard, four rate hikes in 2022 now appear very likely in the face of high inflation, a rate hike in March seems on the table. The labour market is as tight as anyone has ever seen it, Bullard added in a interview with the WSJ that the unemployment rate may fall below 3.0% this year.

The US dollar lost ground versus safe-haven assets also, as the USD/JPY pair plunged to 114.37, holding nearby heading into the Asian opening.

Gold advanced modestly, as investors looked for high-yielding assets. The bright metal trades around $1,827 a troy ounce. Crude oil prices were also up, with WTI trading at $82.60 a barrel.

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