Market Drivers – US Session, September 4

Mohamed Abdelhamid 5 October, 2023 2:51 am Forex Market, Market Update

Before staging a rebound, the bond sell-off drove US and European rates to levels not seen in years. The benchmark German rate touched 3% for the first time since 2011, the 30-year UK yield hit 5%, and the 10-year Treasury yield peaked at 4.88% before falling to 4.73%. The bond market will continue to be actively watched by investors as it continues to be a major force in the financial markets.

Economic Data

Automatic Data Processing (ADP) reports that private payroll growth in September was 89,000, less below the market expectation of 153,000, and the lowest amount since January 2021. This data indicates a softening of the labour market, which will need to be confirmed, which may come from other reports. In accordance with forecasts, the ISM Services PMI dropped from 54.5 to 53.6 in September.

A steepening decline in jobs has been seen this month. Additionally, the US is seeing a steady decline in wages in the past 12 months. The softer ADP report brought some relief to the sell-off in bonds. However, more US data is due on Thursday with Jobless Claims and on Friday with the Nonfarm Payrolls. Upbeat numbers could trigger more USD gains and increase volatility in the bond market.

Key Developments

Boosted by a weaker US Dollar, EUR/USD rose to 1.0525 and posted daily gains. Eurozone Retail Sales dropped more than expected in August, falling by 1.2%, while the Producer Price Index (PPI) declined by 0.6%, matching market consensus. German trade data is due on Thursday. With markets firmly expecting no rate hike from the European Central Bank (ECB) comments from central bankers have become less relevant.

GBP/USD surged, having its best day in over a month, rising from six-month lows at 1.2030 to around 1.2150. The trend is still down, but the rebound offers some relief.

AUD/USD rose, helped by a rebound in commodity prices, holding above 0.6300. The pair needs to recover levels above 0.6360 to alleviate bearish pressure. Australia will report trade data on Thursday.

USD/JPY remained steady around 149.00 after Tuesday’s wild fluctuations. Japanese authorities likely intervened in the market when the pair rose above 150.00.

The Canadian Dollar was the worst performer among majors, affected by the sharp slide in crude oil prices. USD/CAD jumped to 1.3784, reaching the highest level since March.

Gold traded sideways around $1,820 but remains under pressure. Silver lost some ground but remained within the recent range around $21.00, consolidating recent losses.

As expected, the Reserve Bank of New Zealand (RBNZ) kept the rate steady at 5.5%. The next meeting on November 29 will include updated macro forecasts and a press conference, and there could be a rate hike according to market expectations. NZD/USD fell to test September lows at 0.5870 and rebounded, ending the day positively around 0.5930.

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