Market Drivers – US Session, Jan 11

Mohamed Abdelhamid 12 January, 2024 6:29 am Commodities, Forex Market, Market Update

Following Iran’s announcement early on Thursday that a civilian oil tanker had been captured in the Gulf of Oman, WTI crude oil saw a spike in price. The seizure, according to official Iranian state media, was a reprisal for the US seizing the identical ship, which was headed towards Iran, a year prior.

Crude oil is expected to continue having a hard ride through 2024 as Middle East tensions, primarily those centred around Iran, continue to plague global supply chain worries.

With enormous buildups in petrol and oil products continuing to soar, US Crude Oil and oil derivative stockpiles are continuing to outpace market expectations. Crude oil supplies continue to snub market players despite logistical issues, particularly as the US increases its domestic production of crude oil as a net exporter.

Economic Data

The much awaited US inflation report for December proved to be more robust than predicted, which gave the dollar more vigour as traders now speculated that the Federal Reserve could postpone its first interest rate cut. This Friday’s schedule is going to be very interesting as Producer Prices, rather than US inflation, will be the main attraction once again. China also delivers its CPI prints and the consistently important Trade Balance figures. GDP data, as well as industrial and manufacturing production, will be highlighted in the UK.

Higher-than-expected US inflation figures in December prompted investors to rethink the idea of the Federal Reserve trimming its interest rates in the second quarter. The USD Index (DXY) rose to new highs near 102.80, although that move fizzled out as the session drew to a close.

Key Developments

Before the CPI-driven knee-jerk, US stocks as measured by the Dow Jones reached an all-time high barely above the 37800 mark, only to regain momentum towards the conclusion of the day.

Before the US CPI-led knee-jerk pulled the pair down to the 1.0930 zone, EUR/USD briefly flirted with the 1.1000 barrier. Afterwards, though, the two and the other risky assets were able to regain their composure.

GBP/USD added to Wednesday’s uptick and rose to the 1.2770/75 band, approaching the so-far 2024 tops ahead of key data releases at the end of the week.

USD/JPY could not sustain the early move to multi-week highs north of 146.00 the figure and retreated to the 145.60 region around the closing bell on Wall Street. The late corrective decline in the dollar as well as mixed US yields accompanied the pair’s price action.

The selling pressure on the Australian dollar persisted, and as a result, the AUD/USD pair printed fresh weekly lows close to 0.6650. This was in the wake of a tumultuous session for the US dollar and mixed activity in the commodities market, all ahead of Friday’s important Chinese data.

Notwithstanding the significant rebound in crude oil prices, the USD/CAD strengthened to new four-week highs close to 1.3440, supported by the dollar’s gains.

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