Market Drivers – US Session – May 25

Mohamed Abdelhamid 26 May, 2022 5:06 am Commodities, Forex Market, Market Update

The US dollar aimed to recover ground but pared its advance during US trading hours, ahead of the FOMC Meeting Minutes. The document showed that all members supported plans to reduce the balance sheet, while some added that, after the runoff was well underway, it would be appropriate to consider sales of mortgage-backed securities.

Also, all participants at the central bank’s May policy meeting agreed that a half-percentage-point interest rate hike was appropriate, while most judged such a hike would be appropriate at the next couple of meetings. Chances of a 0.50% rate increase in September have decreased sharply with the news, which in turn gave a late boost to Wall Street. Indexes posted substantial gains ahead of the close, after spending the day around their opening levels.

Economic Data

Data kept disappointing on Wednesday, as Durable Goods Orders were up a modest 0.4% in April, below the 0.6% expected.

Other Developments

Gold recovered from $1,841.84 a troy ounce, a fresh weekly low, to settle around $1,855. Crude oil prices remained stable, as WTI trades at $110.60 a barrel. US government bond yields remained stable, ending the day little changed on Thursday.

The European Central Bank published the Financial Stability Review, which took its toll on the shared currency, as policymakers noted that “an abrupt increase in real interest rates could induce house price corrections” while adding that “further corrections in financial markets could be triggered by escalation of war, even weaker global growth or if the monetary policy needs to adjust faster than expected.”

The EUR/USD pair trades around 1.0680, while GBP/USD reached fresh daily highs at the end of the day, now trading around 1.2570. Commodity-linked currencies advanced during the American session against the US dollar, with USD/CAD down to 1.2810 and AUD/USD pressuring the 0.7100 figure.

Tensions between the US and China accelerated after US President Joe Biden said that America would militarily defend Taiwan in the event of a Chinese invasion weighed on the market’s mood, alongside slowing economic growth and lingering inflation.

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