Market Drivers – US Session 19/12/2022

Firmer government bond yields provided near-term support to the USD, but plummeting US indexes limited the dollar’s potential gains.

Gold flirted with $1,800 but finished the day in the red at around $1,786 a troy ounce. Crude oil prices, however, posted modest gains, with WTI settling at $75.40 a barrel.

No catalysts were able to ease Monday’s risk-off sentiment at the beginning of a likely low-volume, pre-holiday week.

The major US stock indexes ended near their session lows as investors resumed last week’s flight to safety, which was driven by recession worries and the Fed’s renewed stance to keep interest rates at restrictive levels until inflation could be brought under control.

Major currency pairs maintained mixed trading at the beginning of the week, with the US Dollar was singing between gains and losses to close the day mixed. The mood was optimistic throughout the first half of the day but deteriorated ahead of Wall Street’s opening.

Key Developments

Some big-tech companies are resuming activity in China as coronavirus-related restrictions relaxed. Furthermore, local authorities pledged to revive consumption and support the private sector in order to strengthen the economy next year.

EUR/USD advanced further following the release of an upbeat December German IFO Survey. The pair traded between 1.0570 and 1.0650, ending the day unchanged at around 1.0600. GBP/USD edged lower on Monday and settled at around 1.2140.

EU ministers announced they agreed on a gas price cap that will take place in mid-February of €180/MWh.

The AUD/USD pair battles the 0.6700 threshold, with demand for the AUD, undermined by the poor performance of Wall Street. USD/CAD recovered ahead of the close but finished the day with losses in the 1.3660 area.

The USD/JPY pair holds just below 137.00 ahead of the Bank of Japan monetary policy decision, while USD/CHF is down to 0.9295.

Economic Data

Confidence among US single-family home builders fell for a record 12th straight month in December as even a scramble to offer incentives for prospective buyers failed to boost traffic and lift sales in today’s high-inflation, high-interest rate environment.

Kicking off a week of key reports on the health of the foundering U.S. housing market, the National Association of Home Builders on Monday said its NAHB/Wells Fargo Housing Market Index dropped two points to 31 this month, falling short of the median estimate of 34 among economists in a Reuters poll.

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