Market Drivers – US Session, September 22

US stocks experienced a fourth consecutive day of losses and even closed as one of the worst weeks since March 2023, with the Dow Jones dropping 0.31% to 33,963.84. The S&P 500 and Nasdaq slipped 0.23% and 0.09%, respectively. Ford ended the day up 1.9% after a source reported progress in negotiations with the striking United Auto Workers union. The losing streak came as investors reacted to the Fed’s signal that interest rates would remain higher for longer.

Bond yields surged after the central bank forecasted another rate hike for 2023, raising investor concerns. A government shutdown could further slow down the economy.

The US Dollar Index recorded its tenth consecutive weekly gain, ending around 105.50. The DXY continues to trend upward, supported by US economic data and the recent Federal Reserve (Fed) meeting.

Economic Data

Economic data in the US exhibited mixed results, with housing data coming in weaker while Jobless Claims dropped to the lowest level since January.

Key Developments

The Japanese yen has been among the worst-performing major currencies, with the Bank of Japan remaining unchanged at its September meeting. Governor Ueda stated that any change would only occur when 2% inflation is achieved. Japan will release economic indicators next Friday, including the Tokyo Consumer Price Index, Unemployment Rate, Industrial Production, Retail Sales, Consumer Confidence, and household spending for August. USD/JPY reached its highest level in decades above 148.00.

The Sterling has weakened due to the Bank of England’s decision to maintain interest rates following a slowdown in inflation. The UK will release a Q2 GDP growth estimate on Friday. GBP/USD has declined for the third consecutive week, reaching its lowest level since March. EUR/GBP has seen its biggest weekly gain since February.

EUR/USD finished the week near 1.0650 after hitting fresh monthly lows at 1.0614. The Eurozone PMI provided some relief with a rebound on Friday. Inflation data will be crucial next week, with Spain and Germany kicking off with CPI on Thursday, followed by France, Italy, and the Eurozone on Friday.

The Swiss franc lost ground against major currencies after the Swiss National Bank (SNB) left its key interest rate unchanged at 1.75%. The Swissy was also influenced by the dovish stance of the European Central Bank. USD/CHF accelerated to the upside, breaking decisively above 0.9000 to its highest level since June. EUR/CHF surged from around 0.9550 to 0.9660.

AUD/USD continued to trade within a range between 0.6500 and 0.6350. Australia will release the Monthly Consumer Price Index on Wednesday, with the annual rate expected to rebound from 4.9% in July to 5.2% in August. Retail sales data will be released on Thursday.

The New Zealand Dollar was the best-performing major currency during the week. NZD/USD gained almost 1%, rising to 0.5975 but was unable to reclaim the 0.6000 level.

On a volatile week for metals market, Gold ended the week flat around $1,925 after recovering ground on Friday. Silver remained above $23.00 and closed around $23.50.

What About Next Week?

Next week, markets will continue to digest the outcomes of recent central bank meetings. Additionally, market participants will closely monitor the release of economic data, with a particular focus on inflation figures from the Eurozone and the US Core Personal Consumption Expenditure (PCE) index.

The key focus in the US will be on Friday’s release of the Fed’s preferred measure of consumer inflation, the Core Personal Consumption Expenditure (PCE) Price Index. It is expected to show a decline from an annual rate of 4.2% to 3.9%. The third estimate of Q2 GDP will be released on Thursday.

Also Read:
Gold shines as US yields drop amid positive market mood

USD/JPY climbs on Friday, aiming for 148.50

Fed’s Bowman: Further interest rate hike likely to combat high inflation