Market Drivers – US Session – Tuesday 7 June

Mohamed Abdelhamid 8 June, 2022 3:10 am Commodities, Forex Market, Global Stock Market, Market Update

Risk aversion has been the one big title for financial markets during the North American trading session. The US dollar slid against major rivals in the last trading session of the day. Lower Treasury yields hindered demand for the dollar because the 10-y note yields 2.97%, after peaking earlier in the day at 3.06%.

Economic Data

Canadian economic activity expanded at a faster pace in May as a measure of employment climbed to its highest level in 11 months, Ivey Purchasing Managers Index (PMI) data showed on Tuesday. The seasonally adjusted index rose to 72.0 from 66.3 in April. In March, it notched a record high of 74.2. The Ivey PMI measures the month-to-month variation in economic activity as indicated by a panel of purchasing managers from across Canada. A reading above 50 indicates an increase in activity.

Other Development

On Tuesday, US Treasury Sec. Janet Yellen testified on the Fiscal Year 2023 Budget before the Senate Finance Committee. She said that the US economy faces challenges from “unacceptable levels of inflation”, as well as headwinds from supply chain snags. An appropriate budget is needed to complement Fed’s actions to tame inflation without harming the labor market.

The World Bank lowered 2022’s global GDP forecast to 2.9% from 4.1%. World Bank President David Malpass has warned that faster than expected quantitative tightening could push some countries into a debt crisis similar to the one seen in the 1980s.

Malpass also added that new energy and food production is imperative for Europe and the world, as it would help reduce prices and inflation expectations.

Wall Street managed to revert its negative tone and posted gains in the last hours of trading, helping mostly commodity-linked currencies. The AUD/USD pair is currently in the 0.7230 price zone, while USD/CAD trades around 1.2520, holding at its lowest in seven weeks.

The USD/JPY pair kept advancing, reaching a fresh multi-year high of 132.99 to end the day at 132.55. USD/CHF posted modest intraday gains to settle around 0.9722.

The EUR/USD pair is recovering from a fresh weekly low of 1.0651 to end the day a few pips above 1.0700. The GBP/USD suffered an early knee-jerk and bottomed at 1.2429, but later recovered to end the day near 1.2590.

Weaker US government bond yields pushed XAUUSD higher. The bright metal changes hands at $1,855 a troy ounce. Crude oil prices, on the other hand, benefited from the positive tone of Wall Street, with WTI at $120.20 a barrel.

Markets’ volatility reflects uncertainty about the economic future amid concerns aggressive quantitative tightening will provoke recessions among major global economies.

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