Market Drivers – US Session, October 17

Mohamed Abdelhamid 18 October, 2023 1:16 am Commodities, Forex Market, Market Update

In the Asian session, Chinese economic data including GDP figures will be the main focus, while RBA Bullock will be speaking at a panel discussion. At the same time, UK inflation data will be released during European trading hours.

Economic Data

In the US, another round of positive economic data was released, with retail sales in September increasing by 0.7% compared to the 0.3% expected, and industrial production increasing by 0.3% compared to a flat reading in August. These positive data initially lifted the US Dollar, however, the rally was short-lived and the DXY closed with slight losses at 106.20.

Remarkable Developments

US Treasury yields also rose sharply, with the 10-year Treasury reaching 4.86% and the German benchmark yield rising to 3.50%.

On Wall Street, however, the reaction was mixed, with the Dow gaining 0.04% and the Nasdaq declining 0.25%. Earnings season will continue on Wednesday as Tesla, Morgan Stanley, Abbott, Netflix, and other companies will be reporting their results.

People are spending more money at bars and restaurants, at car dealers, and online. This is true both on a monthly and trend basis over the last year. People are just looking for a good time and it’s hard not to see the upside risk on the outlook.

The Japanese Yen surged in the European session following reports that the BoJ will likely revise its inflation outlook for the next two fiscal years. The rally was short lived, however, and the Yen quickly reversed course, wiping out all gains. The US Dollar/Yen (USD/JPY) pair found support at 148.75, and, following positive US retail sales figures, gained strength and breached 149.70, with the pair now moving closer to 150.00, which is seen as a potentially important area for the authorities to intervene.

In the Eurozone, the EUR (EUR/USD) pair gained strength against the Swiss franc (USD) and the British pound (GBP) against the Euro (USD). The Euro/USD pair reached a high of 1,062.00 before bouncing back. The pair remained above the 1,0560 level in the European session. The Eurozone will announce the August final readings of the Consumer Price Index. The British pound (GBP) and the US dollar (USD) are trading in a range between 1.2200 and 1.2200, with no clear direction. The focus now shifts to the UK’s inflation data, which is set to be released on Wednesday.

In the Canadian dollar (CAD), the price of the currency fell across the board following the release of data from Canada for September, which showed a drop in the consumer price index (CPI), compared to the market’s expectations of a rise of 0.1%. The yearly inflation rate also slowed down, dropping from 4.0% to just 3.8% for the month.

The price of the Canadian dollar (USD) initially rose above 1.3200, but then dropped back to 1.2200. The price of the NZD remained weak in the early Asian session, as the New Zealand’s Q3 inflation data was lower than expected. The New Zealand dollar/USD pair pared losses during the US session, but closed slightly lower at 0.5960, just above its key support area.

On the other hand, the Australian dollar (AUD) gained for the second day in a row, as the RBA, at 0.6380 and subsequently retraced to 0.6360. On Wednesday, RBA Governor Bullock will speak at the Australian Financial Security Authority Annual Summit Panel. Gold rose despite higher yields but failed to retake levels above $1,930. Silver rebounded sharply at $22.35, rising toward $23.00.

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Treasury yields spike following robust retail sales data