Market Drivers – US Session 13/10/2022

Mohamed Abdelhamid 14 October, 2022 7:38 am Forex Market, Market Update

US inflation on Thursday was behind some wild, volatile moves. Fed is widely expected to decide a 75 bps rate hike in November and a peak policy rate of 4.85% in March 2023. The initial reaction to CPI data release the news was negative. Wall Street retreated, yields soared, and the dollar surged. However, markets changed course after the opening bell, and the greenback ended the day with losses against most major rivals.

Economic Data

The US Consumer Price Index was up by 8.2% YoY in September, above the 8.1% expected, although easing for a third consecutive month. The core annual inflation, on the other hand, reached a fresh multi-year high of 6.6%.

Other Developments

In the UK, rumours are everywhere about the United Kingdom’s mini-budget ended, favouring the Pound demand and adding pressure on the American currency. Speculative interest now believes there won’t be tax cuts, while there were market talks pointing out exactly the opposite.

Russia said Ukraine’s accession to NATO could ignite a third-world war. Also, coronavirus-related restrictions in Shanghai, China, fueled fears of another massive lockdown in the region. Meanwhile, German Health Minister Karl Lauterbach calls for the reintroduction of mask mandates, citing a “sharp increase” in covid cases.

EUR/USD trades around 0.9770, while GBP/USD holds on to substantial gains around 1.1315. Commodity-linked currencies plummeted ahead of Wall Street’s opening but managed to post gains against the dollar. AUD/USD hovers around 0.6300 while USD/CAD is down to 1.3740.

USD/JPY reached a fresh multi-decade high of 147.66. Investors fear a potential BOJ intervention after the pair resumed its advance.

Gold finished the day in the red, despite off its intraday low, now trading around $1,663 a troy ounce. Crude oil prices were up, with WTI now changing hands at around $89 a barrel.

Wall Street was extremely volatile. The Dow Jones Industrial Average added roughly 850 points after trading over 500 points in the red ahead of the US inflation release. The S&P 500 and the Nasdaq Composite added over 2% each.

The Asian session will bring Chinese inflation and trade data, which could affect the market’s sentiment. Later on Friday, the US will publish US Retail Sales.

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