Market Drivers – US Session, February 15

Mohamed Abdelhamid 16 February, 2024 2:20 am Commodities, Forex Market, Market Update

The Atlanta Fed GDPNow estimates for first-quarter growth dipped to 2.9% from 3.4%. Atlanta Fed GDPNow’s report reads as follows: “The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2024 is 2.9 percent on February 15, down from 3.4 percent on February 8”.

Losses in the US dollar prompted another pullback in the US Dollar Index (DXY), and accordingly boosting higher appetite for the risk-linked assets amidst renewed speculation of interest rate cuts by the Fed.

Dollar’s data-driven retreat

US Retail Sales contracted more than expected in January, causing a 0.8% drop to $700.3 billion, a drop beyond economists’ expectations. The decline was attributed to weather events disrupting product demand and consumer patterns. The National Retail Federation attributed the dip to lower prices for goods and increased prices for services. Wells Fargo and Morgan Stanley predict retail sales to soften in 2024, but the strong job market should continue consumer resilience.

The NY Empire State Manufacturing Index improved to -2.4 in February, while the Philadelphia Fed Manufacturing Survey improved to 5.2. Government bond yields have weakened, but 10-year Treasury notes offer 4.25%, recovering from an intraday low of 4.187%.

Key Developments

EUR/USD extended its bounce off yearly lows and approached the key 1.0800 barrier once again, all amidst a favourable risk-on environment. Absent data releases on February 16, the speech by the ECB’s Schnabel should keep investors entertained.

GBP/USD resumed the uptrend and managed to leave behind the key 200-day SMA (1.2562) and revisit the 1.2600 neighbourhood. Across the Channel, Retail Sales will be the sole data release prior to the speech by BoE’s Pill.

USD/JPY added to the previous session’s decline and receded to the mid-149.00s, where some initial contention seems to have turned up. The Japanese docket includes the weekly Foreign Bond Investment figures and the Tertiary Industry Index on February 16.

AUD/USD remained on track to recover the ground lost after Tuesday’s deep sell-off and advanced further north of 0.6500 the figure, as market participants quickly left behind discouraging prints from the domestic job report.

Commodities

Prices of WTI regained the smile on the back of the weaker dollar, persistent geopolitical effervescence, and the Fed’s rate cut expectations.

Both Gold and Silver prices edged higher on the back of declining US bond yields, another negative session of the dollar as well as the broad-based upbeat tone in the commodity universe.

What to watch on Friday?

The US housing market and inflation statistics will be the main focus at the end of the week with the release of Building Permits, Housing Starts, and Producer Prices, all coming before the sophisticated Michigan Consumer Sentiment gauge. Barr and Daly from the Fed are also scheduled to speak.

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