Market Drivers – US Session 29/11/2022

Mohamed Abdelhamid 30 November, 2022 6:41 am Forex Market, Market Update

Generally speaking; risk assets experienced a big deal of uncertainty as the end of November approaches ahead of Fed Chairman Powell’s address on the economy on Wednesday at Brookings Institute. US Nonfarm Payrolls data is looming on Friday. Risk appetite has deteriorated since Monday after Chinese protests police clashes against COVID-linked lockdowns. This development helped the US Dollar index, that otherwise could have fallen to 106.82 from a 20-year high of 114.78 on September 28. The US 10-year yield was up 6bp to 3.74%, weighing on the euro which was down some 0.1% to 1.0330.

Powell will likely reaffirm the Fed’s firm commitment to combat inflation and he could also mention the ”need for more measured rate rises taking account of increased two-way economic risks as policy becomes restrictive and a degree of optimism that the Fed will be able to pull off a soft landing.”

The US central bank is expected to hike rates by an additional 50 basis points on December 13-14, though the odds of a 75-basis-point increase rose over the past several weeks and now stand at a 37% probability.

Economic Data

The Conference Board published fresh Consumer Confidence Index data on Tuesday showing a decline to 100.2 in November from (revised from 102.5) 102.2 in October. Similarly, the Present Situation Index edged lower to 137.4 versus the previous reading at 138.9. in addition, the Expectations Index fell to 75.4 from 78.1 in the same period. Finally, the one-year inflation rate expectations rose to 7.2% from 6.9% in October.

Germany’s inflation rate slowed to 10% in November from 10.4% in October but is still close to high levels not seen since the reunification. The sentiment remains supportive of the Euro in that the ECB signals commitment to raising interest rates to dampen high inflation.

Australian inflation slowed in October as prices for fruit and vegetables sharply retreated and holidays costs also significantly fell, an unexpected turn that could mean interest rates will not have to be hiked as far as some expected.

Early on Wednesday, data released by the Australian Bureau of Statistics indicated its monthly consumer price index (CPI) had risen 6.9% in the year to October, slowing from 7.3% in September. Before this reading, analysts supported a rise to 7.4% or higher in October.

Other Developments

The British pound hovered at 1.1950 and down 0.1% on the day, meeting recent lows in what could turn out to be a double bottom on the hourly timeframe.

Wall Street had mixed performance on Tuesday, as Apple and Amazon experienced losses. The S&P 500 was down 0.14% and is headed for its second straight month of gains in November amid bets that recent inflation readings showing a slight cooling in prices will lead the Fed to scale back.

The Nasdaq declined 0.70% while the Dow Jones Industrial Average was flat. In Europe, the Euro Stoxx 50 was broadly unchanged and the FTSE 100 up 0.5%.

The Australian dollar exhibited improvement as the sentiment improved on hopes that China would reopen from COVID shutdowns. The AUD/USD pair rallied to a high of 0.6748 and was ending around 0.5% higher on the day.

WTI was higher despite some speculation that OPEC will leave quotas unchanged, falling some 1.5% into channel resistance. Gold fell 0.3% to below $1,750 reaching a low of $1,747 while Bitcoin rallied over 1.5% after retesting its yearly lows yesterday.

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