Market Drivers – US Session – 16/05/2023

Mohamed Abdelhamid 17 May, 2023 5:17 am Commodities, Forex Market, Market Update

Gold was subject to a sharp drop below $2,000, remaining under pressure and potentially testing the crucial support level of $1,970. Silver also lost ground, falling to $23.60. Crude oil prices retraced some of Monday’s gains, with WTI ending around $70.55. Cryptocurrencies also experienced losses; BTC/USD falling below $27,000 by 1.40%.

Economic Data

Japan’s growth data for the first quarter and the Australian Wage Price Index will be the highlights of the Asian session on Wednesday. Despite mixed data and the ongoing debt ceiling drama, the US Dollar has gained momentum.

US Retail Sales rose by 0.4% in April, falling short of the market consensus of 0.7%. However, March figures were revised higher from -1% to -0.7%. Industrial Production expanded by 0.5% in April, surpassing the market consensus of 0%. On Wednesday, the US will report Building Permits and Housing Starts.

Key Developments

The US Dollar strengthened across the board on Tuesday, driven by higher US yields and mixed US data. The Dow Jones index experienced a 1% loss, while the Nasdaq slid by 0.18%. Investor sentiment remained cautious. The US Dollar Index gained 0.20% and was last observed above 102.60.

“The president changed the scope of who is negotiating,” said Kevin McCarthy, the top congressional Republican, during his talks regarding the debt ceiling. He sounded more optimistic about a deal to avoid a US default.

Fed’s Mester sounded hawkish on Tuesday. She mentioned she would like to get to a point where it could equally be a potential increase or decrease in interest rates. “I don’t think we’re at that hold rate yet”. More Fed speakers are scheduled on Wednesday. Earlier, Fed’s Barking said that if inflation persists or accelerates “there’s no barrier in my mind to further increases”.

The US 10-year Treasury yield rose to 3.57%, reaching its highest level in two weeks before retracing slightly. The 2-year yield reached 4.12%. European yields also rose, weighing on the Japanese Yen. USD/JPY reached fresh weekly highs above 136.60 before pulling back modestly. Japan will release preliminary Q1 GDP and March Industrial Production data.

EUR/USD was rejected from above 1.0900 and dropped towards 1.0850. It continues to maintain a bearish tone, trading near the weekly low area. Final inflation data is due in the Eurozone on Wednesday.

GBP/USD failed to hold above 1.2500 and pulled back due to a strong US Dollar. The Pound was also influenced by UK data. The ILO Unemployment rate unexpectedly edged higher from 3.8% to 3.9% in the three months to March, reaching the highest level in over a year. The claimant count change also showed an unexpected increase of 46.7K in April, compared to an expected decline of 10.8K.

Also Read:
What signals have Fed officials sent to market within 24H