Market Drivers – US Session – July 19

Mohamed Abdelhamid 20 July, 2023 4:20 am Forex Market, Market Update

Markets responded favourably to the UK’s Consumer Price Index reading that came in below expectations while anticipating a slew of tech profits that were scheduled to be released after the US session.

The value of the US dollar increased significantly. The US Dollar index, or DXY, ranged from a low of 99.925 to a high of 100.535. Additionally, the yen’s decline on Wednesday was advantageous for the US Dollar.

Wednesday’s lower global government bond yields were positive for precious metals, with Gold occasionally shining throughout a tumultuous US session. Gold, on the other hand, finished the day flat near $1,977 and higher than the range’s low and high of $1,969.81 and $1,9870.99. In the meantime, data suggests that a fund sale of gold is depressing prices, as gold ETF holdings on Tuesday hit a 4-month low. Bitcoin is now worth $29976.42, up $181.47 or 0.61%. Despite earlier advances, the price of crude oil and petrol on Wednesday ended up mixed.

Economic Data

For the first time since January, UK Core CPI decreased from 7.1% YoY to 6.9% YoY, and service inflation decreased from 7.4% YoY to 7.2% YoY. But when wages grow faster, the Bank of England’s (BoE) task of bringing inflation down will become more challenging. Although both the core and headline measures came in below estimates, markets reduced their expectation that the BoE will increase interest rates by 50 basis points next month. As a result, GBP/USD kept falling and went from a high of 1.3041 to a low of 1.2867.

According to the monthly data released by the US Census Bureau on Wednesday, housing starts decreased by 8% on a monthly basis in June after increasing by 15.7% (reduced from +21.7%) in May. Building Permits decreased over the said period.

The US housing data missed expectations but failed to trigger a market reaction. The dollar started to outperform its rivals on Wednesday in the US Dollar Index , which tracks the USD’s valuation against a basket of six major currencies, climbing to fresh five-day highs above 100.50 in the American session.

Key Developments

USD/JPY on Wednesday rose by +0.62%. The yen was under pressure Wednesday after Bank of Japan’s Governor Ueda suggested that there will be a continuation of the BOJ’s easy monetary policy until there is a shift in its assessment for achieving its inflation target. Stocks were higher which dented the allure of the Yen and its safe-haven demand.

As for the Euro, the DXY rally was a painful ride for stubborn bulls. An additional decline in the 10-year German bund yield to a 3-week low weakened the euro’s interest rate differentials and EUR/USD ended the day considerably lower touching a low of 1.1174. During the Asian session, markets focus on Australian labour market data and Japan’s trade balance for June.

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