Market Drivers – US Session – Tuesday, August 9

All market players are standing on their toes to find clues and directions from the most awaited US inflation data to be released on Wednesday. The US dollar extended its weekly decline throughout the first hours of the trading session, but later the dollar managed to recover some ground during the US session.


Volatility across financial markets was limited amid lingering US inflation figures. Market players await the US Consumer Price Index, hoping prices pressure have started receding in July. The core annual reading is still foreseen advancing to 6.1% from the current 5.9% level.

The US Dollar Index, on the 4-hour time frame, the price is consolidated along a rising support line as markets await US CPI, July. 105.05 is a key structure that guards a significant correction to the downside. On the upside, an area of price imbalance between 106.40 and near 108 the figure could be targeted.
Financial markets retreated, but so did the US dollar and US yields remain around lower levels of late ahead of the release of the day’s US July Consumer Price Index data in the New York open. The greenback was just above holding onto the 106 level overnight and is flat for the day so far in Asia.

Economic Data

The global oil demand is expected to rise by 2.08 million barrels per day (bpd), down from 2.23 million in the previous forecast, to 99.43 million bpd in 2022, the US Energy Information Administration said in its latest monthly report, as reported by Reuters.

Crude oil prices continue to push lower after this report. As of writing, the barrel of West Texas Intermediate was down 0.45% on a daily basis at $90.10.

The data published by the US Bureau of Labor Statistics showed on Tuesday that Unit Labour Costs rose by 10.8% in the second quarter. This reading followed the 12.7% increase recorded in the first quarter and came in higher than the market expectation of 9.5%.

Productivity, or nonfarm business employee output per hour, decreased at a 4.6% annual rate in the second quarter after falling at a 7.4% pace in the previous three months, Labour Department figures showed Tuesday.

US productivity slumped for a second-straight quarter as the economy shrank, driving another surge in labour costs that risks keeping inflation elevated and further complicates the Fed’s efforts to tame price increases.

Wednesday’s US inflation data could be pivotal for the US dollar, although there will be another report before the next Federal Reserve meeting.

Other Developments

The energy crisis affecting Europe has led to the UK government planning potential organised energy blackouts this winter for industry and households as a worst-case scenario. GBP/USD eased and trades at around 1.2060 ahead of the Asian opening.

The EUR/USD pair flirted with the 1.0250 level but shed some 50 pips ahead of the close. The shared currency was weighed by headlines indicating that Russia reportedly suspended oil flows via the southern leg of the Druzhba pipeline, amid transit payment issues.

At the end of the day, speculative interest will rush to price in whatever they believe the Federal Reserve will do with the monetary policy. China and Germany will also publish inflation data ahead of the US figures.

Commodity-linked currencies turned red against the greenback by the end of the day, although losses are limited. AUD/USD trades around 0.6950 while USD/CAD hovers around 1.2890.

Gold was among the best performers, hitting an intraday high of $1,800.49 a troy ounce. It finished the day at $1,795. Crude oil prices were up at the beginning of the day but finished the day with modest gains. WTI trades at $90.70 a barrel.

Wall Street edged lower, following the lead of its European counterparts, although losses were moderated. US Treasury yields, on the other hand, ticked higher with that on the 10-year note, currently at 2.79%.

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