Market Drivers – US Session 22/11/2022

Mohamed Abdelhamid 23 November, 2022 3:37 am Forex Market, Market Update

The US dollar plummeted on Tuesday amid the better performance of global equities which closed in the green territory on the back of positive risk appetite

Wall Street posted considerable gains, adding the most in the final hours of trading. On the other hand, US Treasury yields edged lower with the 10-year note yield down 7 bps to hover around 3.75%, and the 2-year offering 4.51% barely down for the day.

Economic Data

Richmond Fed Manufacturing Index improved to -9 for November versus -10 prior whereas Eurozone Consumer Confidence also rose to -23.9 for the said month compared to -26 expected and -27.5 prior.

Other Developments

ECB officials paved the way for another 75-bps rate hike at the December meeting, but the Eero showed little reaction to the news. Robert Holzmann, head of the National Bank of Austria, is expected to support a third consecutive aggressive rate hike.

Finnish ECB policymaker Olli Rehn said the central bank would continue to raise interest rates, and the pace of its hikes will be determined by the rate of inflation and the overall economic situation.

Fed officials also had some things to say. Loretta Mester noted that expectations for longer-term inflation are reasonably anchored, although wage growth lags below inflation in most sectors. Finally, she added that labor demand outpaces worker supply.

At the end of the day, the market focus was on the European energy crisis, as the G7 and the EU are once again discussing to cap Russian oil prices.

UK Finance Minister Jeremy Hunt pushed privately for Britain to have closer ties with the European Union, somehow generating tensions in the new Prime Minister Rishi Sunak’s government. The GBP/USD pair settled at around 1.1880 amid the broad dollar’s weakness.

USD/CAD is down 1.3385 after a batch of mixed Canadian data. Retail Sales declined by less than anticipated, while the October New Housing Price Index declined in October. Also, Bank of Canada Senior Deputy Governor Rogers hit the wires and said that higher interest rates are starting to slow the economy and contain inflation. The AUD/USD trades around 0.6640, marginally higher on the day, while USD/JPY hovers around 141.20.

Gold trimmed early gains and finished the day little changed at around $1,738 a troy ounce. Crude oil prices ticked higher, with WTI trading at $81.10 a barrel. During Asian trading hours, investors will be looking at the Reserve Bank of New Zealand monetary policy decision.

The focus now shifts to the FOMC Meeting Minutes. The US Federal Reserve hiked rates by 75 bps for a fifth consecutive meeting earlier in the month, and market players were hoping for a hint on slower pace.

The document released alongside the meeting could be understood as a potential easing in the pace of quantitative tightening, although Jerome Powell’s words surprised with a hawkish tone. The FOMC Meeting Minutes may shed some light on whatever the Fed may decide in December.

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