Market Drivers – US Session – July 25

Mohamed Abdelhamid 26 July, 2023 4:04 am Commodities, Forex Market, Market Update

Wall Street saw another successful trading day with the Dow Jones climbing by 0.08% and the Nasdaq increasing by 0.61%. The positive tone prevailed ahead of key events for markets, supported by hopes of more stimulus from China and for the near end of the tightening cycle from central banks. Stock investors will continue to digest earnings results, with Meta and Coca-Cola reporting on Wednesday.

Gold rose $10, ending above $1,960, helped by the slide of the US Dollar. Silver rose after three days and climbed to $24.65. The outcome of the Fed meeting is likely to trigger sharp volatility in metals on Wednesday. Crude oil prices rose more than 1%, with WTI reaching fresh three-month highs above $79.00.

On Tuesday, the day before the FOMC meeting, the US Dollar Index lost a five-day winning run due to risk appetite and a little decrease in US bond yields. After reaching its highest level since July 12 at 101.60, the DXY declined and dipped below 101.30.

Participants in the market are anticipating the Federal Reserve’s decision. Rates are anticipated to rise by 25 basis points. If the Fed meets expectations, attention will shift to Powell’s advice and the statement’s tone. Before the Fed, new home sales data is required.

Economic Data

The Conference Board’s Consumer Confidence Index increased in July from 110.1 (raised from 109.7) to 117.0, above expectations, according to data from the US released on Tuesday. The anticipated inflation over the next year decreased to 5.7%. In May, the housing price index increased by 0.7%.

German IFO Business Climate Index drops to 87.3 in July vs. 88.0 expected

Key Developments

While raising its prediction for global growth, the International Monetary Fund issued a warning that the economy is “not out of the woods.” The institution claims that the risk of a crash landing has decreased. The forecast for this year is a 3% growth.

EUR/USD edged lower again and bottomed at 1.1018, the lowest in almost two weeks, before bouncing toward 1.1050. The German IFO survey reflected the deterioration in the growth outlook. The European Central Bank is expected to raise its key interest rates by 25 basis points on Thursday.

GBP/USD rose after falling for seven consecutive days, rising to the 1.2900 area. EUR/GBP tumbled from 0.8625 to 0.8560, falling below the 20-day SMA and posting the lowest close in two weeks.

USD/JPY dropped, falling below 141.00, ahead of the Fed meeting amid lower Treasury yields. The Bank of Japan is expected to keep its monetary policy unchanged on Friday.

AUD/USD rose toward 0.6800, propelled by signs of more stimulus from China and risk appetite, extending the move to the upside after holding above the 20-day Simple Moving Average (SMA). Australia will release inflation data for the second quarter and June. The Monthly Consumer Price Index is expected to show a decline in the annual rate from 5.6% to 5.4%. This data is critical ahead of next week’s Reserve Bank of Australia (RBA) meeting.

USD/CAD advanced marginally, ending far from the daily highs and below 1.3200. The pair remains moving sideways between 1.3220 (20-day SMA) and 1.3150.