Market Drivers – US Session 21/09/2022

Mohamed Abdelhamid 22 September, 2022 2:54 am Forex Market, Market Update

The dollar solidified its gains after the Fed triggered volatility and sour market sentiment across the board. As anticipated, the US central bank hiked the benchmark rate by 75 bps to 3.25%, while policymakers maintained their determination to bring inflation down to the 2% target.

US Treasury yields soared. The 2-year Treasury note currently offers 4.03% after reaching an intraday peak of 4.12%. The yield on the 10-year note eased to settle at 3.51%.

Fed Chair Jerome Powell was cautiously optimistic about economic progress, which put a cap on the dollar’s appreciation while Wall Street fell to fresh lows, the US dollar recovered ground.

Oil prices fell about 1% to a near two-week low in volatile trade on Wednesday after the Fed delivered another rate hike to fight inflation that could reduce economic activity and demand for oil.

Brent crude futures settled 79 cents, or 0.9%, lower at $89.83 a barrel, its lowest close since Sept. 8, while U.S. West Texas Intermediate (WTI) crude fell $1.00, or 1.2%, to $82.94, its lowest close since Sept. 7.

Earlier in the session, oil gained over $2 a barrel on worries about a Russian troop mobilization before dropping over $1 on a strong U.S. dollar and lower U.S. gasoline demand.

Economic Data

Existing Home Sales in the United States have declined for the seventh successive month in August to a seasonally adjusted annual rate of 4.8 million. The National Association of Realtors reported on Thursday that “sales were down 0.4% and 19.9% on a monthly and yearly basis, respectively”.

Other Developments

Risk aversion prevailed during the European session, as Russia’s President Vladimir Putin announced a mobilization of reservists. Additional 300,000 citizens have been called to serve in Ukraine as Moscow loses ground in Ukraine.

EU member states held a meeting to discuss a coordinated response to the continuation of the war, according to European Commission spokesman Peter Stano.

The EUR/USD pair fell to 0.9812, its lowest since October 2002, and currently hovers around 0.9860. GBP/USD also plummeted, now trading at 1.1280.

Commodity-linked currencies are among the weakest, weighed by the poor performance of Wall Street. The AUD/USD pair trades at around 0.6640, while USD/CAD pressures highs in the 1.3440 price zone.

Safe haven assets achieved some gains against the US dollar. The USD/JPY pair hovers around 144.00 while spot gold jumped to $1,690 per ounce before giving up $20 before the session closed. Finally, WTI settled at $83.20 a barrel, marginally lower in the day.

The Bank of Japan is next, as the monetary policy decision is coming up in the next Asian session. Finally, the Bank of England and the Switzerland National Bank will announce their decisions during European trading hours.

Also Read
US dollar touches two-decade high on Fed’s decision