Market Drivers – US Session 21/03/2023

Mohamed Abdelhamid 22 March, 2023 4:58 am Commodities, Forex Market, Market Update

Wall Street indexes rose sharply on Tuesday ahead of the Federal Reserve decision, led by shares of regional banks. First Republic stock rose 29%. The Dow Jones gained 0.98%, and the Nasdaq advanced 1.58%. Banking fears keep easing, paving the way for more tightening from central banks.

US Treasury Secretary Janet Yellen said the US banking system is sound and mentioned the government is ready to take more action to help bank depositors.

US yields rose sharply, with the 10-year reaching 3.60% and the 2-year 4.17%. The German 10-year yield jumped almost 8% to 2.29%.

Economic Data

Data released in the US showed Existing Home Sales jumped 14.5% in February, above the 5% of market consensus, to a 4.58 million-unit pace, the largest monthly increase since December 2015, excluding the volatile pandemic era. The Philly Fed Non-Manufacturing dropped to -12.8 in March.

Key Developments

On Wednesday, the Fed is expected to raise rates by 25 bps; however, there are also calls for a no change and even for a rate cut. Analysts will watch the decision, the projections, the statement and Powell’s words closely. As a result, traders should expect high volatility during the American session.

EUR/USD rose for the fourth consecutive day, approaching 1.0800 on Tuesday. The pair reached monthly highs before losing momentum. The Euro was among the biggest gainers as the banking crisis eased, suggesting the European Central Bank (ECB) could raise rates further if needed.

GBP/USD pulled back from six-week highs near 1.2300 to 1.2178 and then climbed back above 1.2200. On Wednesday, key inflation data and retail sales are due in the UK. On Thursday, the Bank of England (BoE) will announce its policy decision.

USD/JPY rose to the 132.50 area, having the best day in two weeks, boosted by higher government bond yields. The Japanese Yen was also affected by risk-on flows.

USD/CHF fell from above 0.9300 toward 0.9200. The Swiss National Bank (SNB) will announce its monetary policy decision on Thursday. Market consensus if for a 50 bps rate hike; however some analysts forecast a smaller hike given recent market volatility and uncertainty around the Swiss banking system.

USD/CAD rebounded sharply from weekly lows under the critical 1.3650 area toward 1.3740. Inflation data in Canada showed the Consumer Price Index dropped from 5.9% to 5.2%, the lowest level in 13 months. The CAD rose for the second day in a row versus AUD and NZD.

AUD/USD and NZD/USD pulled back from weekly highs to 0.6175 and 0.6650, respectively, despite the improvement in global market sentiment. Reserve Bank of Australia (RBA) minutes suggested the central bank is considering a pause at the next meeting.

XRP rose 30% and Bitcoin gained 1.50% on Tuesday and settled at $28,280. So far, in 2023, the largest cryptocurrency has risen 70%.

Gold corrected further to the downside, losing $30 and bottomed around $1,935, weighed by surging US yields. Crude oil prices rose again, extending the recovery from multi-month lows. The WTI barrel gained 2.49%, approaching $70.00, helped by the better mood across financial markets.

Als Read:
FOMC Decision Preview: March 22