Market Drivers – US Session 14/09/2022

The US dollar that fell to the 109.257 low, but did not stay down for long on Wednesday, the Dollar Index rallied back to test the 109.70s in New York. Technically, the index is on course for the 109.90s again ahead of what is expected to be a hawkish Fed’s tightening track next week.

GBPUSD ranged between 1.1480 and 1.1590 and ended the day higher despite a recovery in the greenback and data that showed that inflation ticked lower in August after breaking the 10% threshold, which was last seen in 40 years.

Ahead of Thursday’s labour market data, AUD/USD formed a double bottom near 0.6700 and climbed towards its daily high at 0.6760. It will be a busy day for the antipodeans with New Zealand growth data to start ahead of the Unemployment number later in the session.

Economic Data

Wednesday’s inflation data was more kind than Tuesday’s, showing producer prices (PPI) declined for a second straight month in August as gasoline prices fell further, but this was not enough for markets to price put the Fed’s aggressive stance.

The US Department of Labor reported that August’s Producer Price Index (PPI) moderated, dropping 0.1% MoM, aligned with forecasts, while the annual reading edged lower by a full percentage point to 8.7% vs. 9.8% in the previous month. Core PPI, every month rose by 0.4% but annually exceeded estimations, topping at around 7.3%.

Other Developments

International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Wednesday that central bankers must be stubborn in fighting broad-based inflation, as reported by Reuters.

“If fiscal policy is not targeted sufficiently, it may become the enemy of the monetary policy, fueling inflation,” Georgieva further added.

There have been no Federal Reserve speakers on Wednesday as the media blackout went into effect at midnight Friday ahead of Chair Jerome Powell’s post-decision press conference on September 21.

As for other central banks, the yen rose 1% against the dollar on Wednesday after the Bank of Japan conducted a rate check-in in possible preparation for currency intervention. According to Reuters, central bank officials called up dealers and asked for the price of buying or selling yen. ”However, actually intervening to support the currency would be a larger step.”

At the same time, Japanese Finance Minister Shunichi Suzuki told reporters on Wednesday that recent yen moves have been “rapid and one-sided”, adding that yen-buying currency intervention was among the government’s options should such moves continue. USD/JPY dropped from a high of 144.96 to a low of 142.55.

New Zealand’s second quarter Gross Domestic Product data are out on Thursday. A 0.4% quarter-on-quarter expansion is expected, but given data volatility and mixed signals going in, a read plus or minus 1 percentage point of our pick would not surprise.

In crypto, volatility struck as traders positioned in preparation for Ethereum’s transition to Proof-of-Stake. Bitcoin and Ethereum have retraced more than 7% over the past 24 hours.

In commodities, gold fell to a low of $1,693.78 from a high of $1,707.07 while WTI came up for air, printing a high of $90.17.

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