Market Drivers – US Session 26/04/2023

Mohamed Abdelhamid 27 April, 2023 3:46 am Forex Market, Market Update

The ANZ Business Outlook survey is due during the Asian session in New Zealand, and it will be followed by Australia’s Import and Export Price Index. Prior to central bank meetings, markets are awaiting crucial economic data from the US and Eurozone.

On Thursday, Wall Street declined once more due to pessimistic forecasts and financial worries. First Republic Bank continued to decline. Investors are still digesting the latest earnings figures. On Thursday, Amazon, Mastercard, Merck, T-Mobile, Intel, Honeywell, Activision Blizzard, American Airlines, and Hertz will all report earnings.

Economic Data

The US will release its initial estimate of Q1 GDP growth on Thursday. This estimate includes the Core Personal Consumption Expenditure Index, an indicator of inflation that Fed officials constantly monitor. Wells Fargo analysts issue a warning that actual growth figures may be substantially lower than expected.

This week’s publication of revised retail sales figures has the potential to be a game-changer. Real GDP growth for Q1-2023, which will be published on Thursday morning, might come in at half the growth rate currently anticipated by the consensus if our reading of the most recent adjustments is accurate.

Other reports due in the US on Thursday include Jobless Claims, Kansas Fed Manufacturing Activity and Pending Home Sales. However, this number could be offset by inflation and growth numbers ahead of next week’s FOMC meeting. A final 25 basis points rate hike is priced in.

Key Developments

The US Dollar Index dropped 0.40% on Wednesday and finished far from the lows. While the Greenback hit fresh 13-month lows versus the Euro, it reached monthly highs against the Aussie and the Kiwi. Commodity currencies were hit by risk sentiment. Next week, the Fed will have its monetary policy. Markets see a final 25 basis point rate hike, but expectations have eased up a bit following renewed banking concerns. US consumer inflation will be critical for Fed’s forecast.

The Euro outperformed on Wednesday amid rising odds (still low) of a 50 basis points rate hike from the European Central Bank next week. Germany, Spain and France will release inflation data alongside Eurozone Q1 GDP on Friday. EUR/USD climbed to 1.1094, reaching the highest intraday level since March 2022 and then pulled back, trimming gains.

USD/JPY ended flat, around 133.60, amid relatively steady bond yields and a mixed Dollar. On Thursday, the two-day monetary policy meeting kicks off at the Bank of Japan, the first one under Kazuo Ueda. No change is expected.

Inflation slowed further during the first quarter in Australia, cementing the case for the Reserve Bank of Australia (RBA) to stay on hold next week. AUD/USD dropped again, reaching monthly lows under 0.6600. NZD/USD continued to move slowly toward 0.6100 and March lows. The ANZ’s Business Outlook survey is due on Thursday. USD/CAD rose marginally, holding above 1.3600.

Metals remained sideways. Gold ended lower at $1,988 after hitting a weekly high at $2,009, while Silver slipped below $25.00. Crude oil prices lost more than 3%; WTI fell to $74.50, erasing April’s gains.

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