Market Drivers – US Session – Thursday, June 9

WTI crude, futures on NYMEX, holds above $119.00 and faces a minor time correction after a vertical upside move. The black gold is holding its gains despite the renewed fears of a lockdown in China to contain the spread of the Covid-19. The Chinese economy was recovering from lockdown measures in Shanghai and Beijing after a two-month lockdown period. Restrictions on the execution of various economic activities were getting the traction again, however, the discovery of fresh Covid-19 cases has raised questions over the zero Covid-19 policy of China.

Speaking at a New York event, US Treasury Sec. Janet Yellen explained that she does not think the US is going to have a recession.. The American dollar soared on Thursday as risk aversion and concerns dominated financial markets. The dollar’s catalyst was the European Central Bank, as Lagarde and policymakers reaffirmed their commitment to raise rates in July, although they anticipated a 25-bps move.

Economic Data

There were 229,000 initial jobless claims in the week ending on 4 June, above the prior week’s reading of 202,000 and expectations for a rise to 210,000. That pushed the four-week average higher to 215,000 from 207,000 a week earlier.

Other Development:

Investors were hoping ECB could go for a 50 bps hike in July amid inflationary pressures. Lagarde pointed out that more hikes are likely in the near future, although the scale of each increment would depend on the medium-term inflation outlook.

Additionally, the central bank upwardly revised the annual inflation forecast, now seen at 6.8% for this year, then decreasing to 3.5% in 2023 and to 2.1% in 2024. On the other hand, growth has been slashed to 2.8% in 2022 and to 2.1% for the next two years. The EUR/USD pair plummeted, now trading near the 1.0600 price zone.

The Bank of Canada published a bank stress test, revealing that major banks would incur huge financial losses but would remain resilient in the event of a large and lasting economic shock. The document also showed that monetary policy tightening would put the financial system’s resilience to the test and may exacerbate current financial vulnerabilities. The USD/CAD pair is at1.2700 back from an intraday low of 1.2517. Softer crude oil prices weighed on the CAD as the black gold settled at $ 121.10 a barrel.

The AUD/USD gave up to Wall Street’s sell-off and finished the day just below the 0.7100 threshold. Gold weakened within range, now trading at around $1.847 a troy ounce.

USD/CHF and USD/JPY edged higher amid the dollar’s strength and higher US government bond yields. The 10-year T note yielded as much as 3.073%, a multi-week high.

The GBP/USD pair fell sub-1.2500, affected by risk aversion but with the Pound was also hurt by comments from UK Prime Minister Boris Johnson, who said that the kingdom is in a better position than in the past when the nation has faced economic difficulties, although he added that there is no quick fix to the situation in Ukraine, one of the reasons of mounting price pressures. US indexes closed dip in the red, with the Nasdaq Composite being the worst performer, down 2.50%.

Wall Street’s main indexes retreated in mixed trading Thursday. Technology and growth equities are struggling to find direction amid rising treasury yields and weaker risk appetite on the back of accelerating concerns around soaring inflation and aggressive interest rate hikes.

The Dow Jones Industrial Average was down 60.73 points, or 0.18%, at 32,850.17, the S&P 500 was down 9.04 points, or 0.22%, at 4,106.73, and the Nasdaq Composite was down 30.00 points, or 0.25%, at 12,056.27.

The focus will be on US inflation on Friday, as the country will release the May Consumer Price Index, foreseen stable at 8.3% YoY. However, the White House warned on Wednesday that the government expects inflation numbers to be “elevated.”

Also Read:
WTI holds above $119.00 despite China’s renewed lockdown concerns

Treasury Yields jump ahead of inflation data

Sec Yellen: Don’t think US is going to have a recession

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USD/JPY Retreats from two-decade highs towards 134.00s

Typical mortgage payment could be 30% higher in 5 years, Bank of Canada warns

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