Market Drivers – US Session – 13/07/2023

Mohamed Abdelhamid 14 July, 2023 5:12 am Forex Market, Market Update

The US Dollar sharply dropped again after the release of more inflation data from the US. The figures offer signals that inflation continues to cool, triggering more gains in Wall Street and Treasury bonds.

Economic Data

The US Producer Price Index (PPI), which reached its peak in June 2022 at 11.2%, increased by 0.1% in June relative to a year earlier, which is the lowest figure since August 2020. Initial Jobless Claims fell from 249K the week before to 237K in the week ending July 8, according to labour market data.

Key Developments

The Fed plans to increase interest rates by 25 basis points on July 26 despite a slowdown in inflation. Market players are, nevertheless, increasing their bets that this will be the final hike before the cycle tightens. These hopes are causing the US Dollar to decline. The University of Michigan will publish its assessment on consumer confidence on Friday.

Since April 2022, the US Dollar Index (DXY) hasn’t been lower than 100.00. The DXY has decreased for six days in a row with no signs of stabilization. The significant downward momentum of the Dollar could result in more losses.

Wall Street cheered inflation figures again. The Dow Jones rose 0.14%, the S&P 500 gained 0.85% (highest close since April 2022), and the Nasdaq rose by 1.58%. Commodities also rose further, with Silver extending weekly gains with a 3% gain to $24.85, while Gold remained steady hovering around $1,960.

Even though China early on Thursday revealed dismal June trade figures, the positive mood persisted across equity markets. The highest decline in exports since February 2020 was 12.4% YoY, and imports increased by 6.8%, both worse than anticipated. The figures put greater pressure on Chinese leaders to increase stimulus measures.

The positive trend is still strong, and the EUR/USD price rose to 1.1225, remaining at its highs. Another rate increase in July was predicted by the European Central Bank (ECB) minutes. The European Commission will present trade balance information and predictions for economic growth on Friday.

The GBP/USD pair gained again on a daily basis, as it has been doing all month. The pair reached its highest level in 15 months after breaking above 1.3000 and 1.3100. In May, the UK’s GDP shrank by 0.1%, less than the -0.3% predicted. Indicators for industrial production also indicated a fall in May, but it was smaller than expected. Even though the Bank of England’s expectations are tightening less than expected, the pound remains strong.

USD/JPY retreated for the sixth consecutive day, reflecting the weakness of the Dollar and lower government bond yields, falling towards 138.00. The Japanese currency gained ground versus other currencies amid risk appetite.

Antipodean countries continue to benefit from the weaker Dollar and higher equity prices. AUD/USD jumped towards 0.6900, testing June highs and posting the highest daily close since February. NZD/USD climbed to the highest level since early February, just below 0.6400.

USD/CAD closed at 1.3100, the lowest level since August 2022. On Friday, Canada will report May Manufacturing Sales. The Loonie lagged behind AUD and NZD despite the 2% gain in crude oil prices.

Also Read: