Market Drivers – US Session – September, 7

Mohamed Abdelhamid 8 September, 2022 3:07 am Forex Market, Market Update

The US dollar was able to maintain its strong stance throughout the first half of the day, but later, the dollar had to retreat along with the sliding T-yields during the US trading session.

Gold fell to touch intraday low of $1,691.32 per troy ounce but managed to recover towards the current $1,716 level. At the time of writing, the precious metal is trading at $1717.40.

Crude oil prices, on the other hand, sharply declined amid expectations about easing Chinese demand following Chinese weal trade surplus data.

Economic Data

China’s trade surplus was $79.39 billion in August, below the $101.26 billion from July.

According to the Federal Reserve Bank of Atlanta’s GDPNow model, the US economy is expected to grow at an annualized rate of 1.4% in the third quarter, down from 2.6% in the previous reading.

The Fed published its Beige Book, a survey of economic conditions based on data from 12 district banks. The document showed that price growth has slowed in 9 of the 12 districts, although most surveyed believe price pressures will last at least until the end of the year.

Other Developments

The Bank of Canada hiked its rate by 75 basis points to 3.25%, in line with market expectations. The policy statement showed that policymakers would likely continue to confront inflation with more hikes.

BoC also revealed that they believe the economy continues to operate in excess demand and labor markets remain tight. USD/CAD trades around 1.3140.

The EUR/USD pair flirted with 2002 low at 0.9859 before recovering, now the pair is battling to regain parity.

The European energy crisis could be a key factor behind limiting the Euro’s demand. Overall, the price pressures in the EU are impacting both families and firms.

Such prices are pushing inflation higher. European metal producers have called for emergency EU action to prevent permanent deindustrialization in a letter to the European Commission President, Ursula Von der Leyen.

Producers noted that 50% of the EU’s aluminum and zinc capacity has already been forced offline due to the power crisis.

Russia’s Putin noted that the G7 oil price cap would be an absolutely stupid decision, adding that Moscow would not supply anything if it is contrary to Russian economic interest. “No gas, no oil, no coal, no fuel oil, nothing.”

The European Central Bank will announce its monetary policy decision on Thursday. The ECB is widely anticipated to hike rates by 50 bps when it meets on Thursday, but the focus will be on whether European policymakers are willing to put growth behind taming inflation or not.

BoE’s Monetary Policy Report Hearings put pressure on the sterling at the beginning of the day, with GBP/USD plummeting to 1.1404. Policymakers are still on the tightening path, and Governor Andrew Bailey noted that the central bank would continue to respond to price shock. Broad dollar’s weakness helped the pair to recover to the current 1.1510 price zone.

The USD/JPY pair kept marching higher and reached 144.98, to end the day around the 144.00 figure.

The AUD/USD pair trades around 0.6750 by the end of the day, trimming early losses. Encouraging Australian data did little for the pair, rising amid the better tone of Wall Street and easing government bond yields weighing on the US currency.

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