Market Drivers -US Session – Friday, August 19

Mohamed Abdelhamid 20 August, 2022 3:25 am Forex Market, Market Update

The US dollar gained 0.73% to 136.87 against the Japanese yen, the strongest since July 27. Sterling tumbled 1.03% to $1.1813 and had its biggest weekly drop against the dollar since September 2020.

The US central bank needs to keep raising borrowing costs in order to tame high inflation, as clearly expressed by Fed speaks on Thursday. The US dollar index hit a five-week high and posted its biggest weekly gain since April 2020 on Friday as investors adjusted monitor Fed’s rate hiking expectations.

Economic Data

US drilling activity are relatively flat, with 762 rigs working during the week ended Aug. 19, down 1 from the previous week but up 256 from the same period a year ago, Baker Hughes reported Friday.

Earlier on the day, Retail Sales in Canada rose by 1.1% on a monthly basis in June following May’s increase of 2.3% (revised from 2.2%), the data published by Statistics Canada revealed on Friday. This reading came in better than the market expectation for a growth of 0.3%.

Other Developments

On Friday, WTI crude oil trades at $90.44 versus $90.11 on Thursday. Brent trades at $95.17 versus $90.75 on Thursday. Bearish sentiment dominated oil markets amid fears of demand destruction. Rumors on nuclear deal renewal are pushing crude prices down. Inventory draws in the US are pushing prices higher, but downward pressure continues.

OPEC’s Sec. General Haitham al Ghais blamed policymakers and insufficient oil and gas sector investments for the high prices, and not OPEC which has not been impacted by domestic pressures to stop oil projects.

Gold is ending the trading week down more than $50 because the US dollar has strengthened to weigh, accordingly, on the precious metal ahead of the Jackson Hole economic symposium and Fed Chair Jerome Powell’s speech before the symposium.

Next week’s significant catalyst will be Powell’s speech before the Jackson Hole titled ‘Economic Outlook,’ which is scheduled for Friday. Markets remain divided on whether the Fed will hike rates by 50 or 75 basis points at its September meeting. Economists speak about a 56.5% probability of a 50bps hike and a 43.5% chance of a 75bps increase. Lower gold prices next week are also expected ahead of the Jackson Hole symposium while the US dollar might be up significantly. It seems relatively difficult for gold to rally in such an environment.

Also Read
Demand Fears Cannot Keep WTI Price Below $90