Market Drivers – US Session – 22/05/2023

Mohamed Abdelhamid 23 May, 2023 3:28 am Commodities, Forex Market, Market Update

Gold’s gains from Friday were partially reversed, with XAU/USD slipping towards $1,970/oz. Additionally falling, silver finished the day at $23.60. The performance of cryptocurrencies was uneven, with BTC/USD failing to recoup $27,000. Prices for crude oil increased somewhat; WTI got close to $72.00.

On a quiet Monday in the financial markets, the US dollar ended the day essentially unchanged. Investors continue to pay close attention to the continuing discussions about the US debt ceiling and are anxiously expecting any developments. House Speaker McCarthy and US President Biden will meet later on Monday at 21:30 GMT to continue the conversation.

A breakthrough in the talks must happen this week if a deal is to be made and signed into law before early June.

Banking worries are still there, but Treasury Secretary Yellen warned bank CEOs that additional mergers might be required. Her remarks still imply that a return to normalcy is still some time away. As the S&P Global PMIs are released on Tuesday, focus is anticipated to return to economic data. Richmond Fed Manufacturing and New Home Sales will also be made public.

The Japanese Yen was among the worst performers, weighed down by government bond yields that remain at monthly highs. The 10-year Treasury yield settled at 3.72%, the highest level since March 9. USD/JPY rose above 138.50, toward last week’s highs, but faces resistance around the 138.80 area. Monday’s data from Japan revealed that the core machinery order unexpectedly dropped by 3.9% in March. The Japan Jibun Bank PMI is due to be released on Tuesday.

After rebounding on Friday, the EUR/USD pair traded flat, moving sideways and testing levels below 1.0800. Market participants are now focused on the release of preliminary Eurozone PMI numbers scheduled for Tuesday. The readings are expected to be crucial (May preliminary), particularly given the current economic environment and the data-dependent forward guidance. Additionally, several European Central Bank (ECB) members, including Guindos, Muller, Nagel, and Villeroy, are set to speak.

GBP/USD finished the day flat, hovering around 1.2430. The UK is set to report on Public Sector Net Borrowing, and PMI data will also be released. On Wednesday, inflation data is due, which could have a significant impact on the pound.

Commodity currencies traded in narrow ranges against the US dollar. USD/CAD rose marginally, closing above 1.3500. The pair continues to move sideways around the 20-day Simple Moving Average (SMA). On Tuesday, Canada is set to release its wholesale inflation data.

AUD/USD remained below the 20-day SMA, but rose to the 0.6650 level during the American session. On Tuesday, Australia is scheduled to release its PMI data.

NZD/USD posted modest gains, managing to record its highest daily close in a week, but still below the 0.6300 level. On Wednesday, the Reserve Bank of New Zealand (RBNZ) is scheduled to announce its decision on monetary policy. Market analysts are expecting a rate hike, with some predicting a 25 basis points increase and others forecasting a 50 bps hike.

What to watch on Tuesday

Tuesday is an important day for PMIs releases, as it will offer the first glimpse of global economic activity during May. During the Asian session, the S&P Global Composite PMI is scheduled for release in Australia, followed by Japan later in the day. Later will be the turn of Europe and the US.

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Wall Street mixed as investors focus on debt ceiling talks