Market Drivers – US Session, December 13

Mohamed Abdelhamid 14 December, 2023 3:02 am Commodities, Forex Market, Market Update

After the Federal Reserve meeting, the US Dollar experienced a significant collapse. As expected, the central bank decided to keep interest rates unchanged. Market analysts are forecasting three rate cuts for 2024. Fed Chair Jerome Powell leaned dovish, adding fuel to the rally in Treasury bonds. He refrained from declaring victory on inflation, but markets did.

The 10-year yields dropped more than 4%, reaching their lowest level since August. At the same time, the US Dollar Index (DXY) declined by 0.85% to 102.80, marking its lowest point in two weeks. The US Dollar is under pressure and appears to have resumed its downward trend after a two-week correction.

After surging by more than $40 in a matter of hours after the FOMC meeting, gold is once again in the spotlight. The Gold Price Index (XAU/USD) hit the $2,020 mark and above. There might be more opportunity for profit if the US yield curve continues to drop. Silver increased by more than 4% as it joined gold’s rally.

Economic Data

On Thursday, important data from the US will be released, including the weekly Jobless Claims and Retail Sales reports.

Key Developments

Following the Fed meeting, the GBP/USD pair increased, hitting one-week highs above 1.2600. The technical picture points to more profit potential. The crucial level of support is at 1.2500. The Bank of England will make its monetary policy announcement, and interest rates are not anticipated to change.

The 20-day Simple Moving Average (SMA) was reached by the EUR/USD pair as it rose. Nevertheless, resistance to the rise was found near the 1.0900 mark. The monetary policy meeting of the European Central Bank (ECB) is scheduled, and it is generally anticipated that rates will remain unchanged. The ECB’s 2024 projection will be the main focus, particularly with reference to when possible interest rate reduction might occur.

As a result of declining Treasury yields and a weaker US dollar over the weekend, USD/JPY shed about 300 pip. The two fell below the 143.00 mark. The Japanese Yen was among the top gainers following the Federal Reserve meeting, even with the Wall Street rally. In the near future, Japan is expected to reveal significant data, such as Industrial Production and Machinery Orders, in response to a favourable Tankan survey.

The USD/CHF pair is presently challenging the 0.8700 region as it resumes its slide towards the 20-day Simple Moving Average (SMA). Interest rates are anticipated to remain unchanged by the Swiss National Bank (SNB), with the key rate staying at 1.75%.

In the lead-up to the Asian session, the NZD/USD pair showed significant bullish momentum, rallying back towards the December highs and maintaining above 0.6200. GDP (Gross Domestic Product) data for Q3 will be released in New Zealand, where a 0.2% increase is anticipated.

The AUD/USD pair broke a multi-day range and saw its highest performance in a month. The pair moved closer to their December highs, and the 0.6700 level is once again being watched. Due on Thursday, the Australian November Employment Report is anticipated to show a positive shift in employment of 11,000 following the 55,000 gain in October. There are plans to release the Melbourne Institute Consumer Inflation Expectation study as well.

What to watch on Thursday?

The Bank of England, the European Central Bank, the Swiss National Bank, and the Norges Bank will all make their monetary policy announcements after the Fed did.

Key economic data, including Australia’s employment report and New Zealand’s Q3 GDP figures, will be issued during the Asian session. Japan will also make available statistics on industrial production and machinery orders.

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