Market Drivers – US Session – Tuesday, August 23

Mohamed Abdelhamid 24 August, 2022 2:43 am Forex Market, Market Update

Some economists advise stock investors to completely forget about a dovish Fed and, instead, to get used to aggressive interest-rate hikes. The summer rally in stocks finally crossed the finish line, this week, as investors reconsidered an overly optimistic view that the US central bank would pivot away from outsized rate hikes to fight inflation. Observers look forward to Powell’s speech on Friday to ascertain if this piece of advice is wise enough.

On Tuesday, safe-haven currencies posted gains versus the US dollar, with USD/CHF hovering at around 0.9640 and USD/JPY trading at 136.77.

GBP/USD hovers around 1.1830, while AUD/USD stands in the 0.6920 region. The USD/CAD pair fell sharply and finished the day at 1.2950.

Gold is currently trading at $1,7477 a troy ounce, up for the day, while crude oil prices extended their latest advance amid market talks suggesting OPEC+ may cut back production. WTI is now at $93.60 a barrel.

Economic Data

Tuesday’s catalyst, for the dollar’s rivals, was a batch of negative US data, as the US Services S&P Global PMI contracted to 44.1. At the same time, the manufacturing index expanded at a slower-than-anticipated pace, with the index down to 51.3 from 52.2 in July. S&P Global PMIs for most major economies indicated slowing economic progress and even contraction, indicating it is a global issue.

Sales of newly constructed homes fell by 12.6% in July from June and were down 29.6% from a year ago, according to a joint report from the US Department of Housing and Urban Development and the US Census Bureau. It was the second consecutive month of declines. Only 511,000 new homes were sold last month, at a seasonally adjusted annualized rate, down from a revised 585,000 in June. That’s the lowest sales number since January 2016.

Other Developments

The US dollar turned to the red territory after extending its rally throughout the first half of the day, ending the day down against most major rival currencies.

The US dollar recovered some ground ahead of Wall Street’s close as risk-off flows continue. The dollar’s decline seems corrective amid extreme overbought conditions. US data helped investors book some profits, but there are no signs of a trend change.

ECB Executive Board member Fabio Panetta painted a gloomy picture. He said that the central bank might need to adjust the monetary policy further as the probability of a recession increases. Meanwhile, speculative interest is slowly but steadily increasing bets of a US Federal Reserve 75 bps rate hike in September.

The economic calendar will remain empty in Asia, with the focus on US Durable Goods Orders on Wednesday.

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