Market Drivers – US Session – Wednesday, June 15

Mohamed Abdelhamid 16 June, 2022 4:16 am Commodities, Forex Market, Market Update

Central banks are inside the storm amid global tenacious high inflation. The US Fed was the star of Wednesday’s interest rate show. Fed decided to hike rates by 75 bps, the largest since 1994, but dismissed the chances of a 100 bps hike.

Fed Chair Powell said it was the current pace of hikes is appropriate and that it could be either 50 or 75 bps in the next meeting, adding they are “front-loading.”

Earlier on Wednesday, the ECB called for an emergency reunion and decided that it would apply flexibility in reinvesting redemptions coming due in the pandemic emergency purchase programme (PEPP) portfolio, concerned about the bonds’ sell-off over the last few days.

The EU has announced new legal action against the UK government over its plans to scrap parts of the Northern Ireland Protocol. The UK aimed to change trade, tax and governance arrangements that disrupted trade in the kingdom. UK Prime Minister Boris Johnson’s spokesman said afterwards that the UK is disappointed with the EU bringing legal action over the Brexit deal.

The EUR/USD pair bottomed at 1.0358, ending the day around 1.0450. GBP/USD was also able to recover and settled in the 1.2170 area. Commodity-linked currencies were able to advance against the greenback amid stocks’ rallies. AUD/USD trades around 0.7000, while USD/CAD hovers around 1.2900. The USD/JPY pair, in the meantime, pressures the base of its latest range, trading at 133.70.

Gold closed the day with gains at $1,834 a troy ounce, while crude oil prices kept retreating. The barrel of WTI now changes hands at $116.00.

Economic Data

Retail Sales in the US fell by 0.3% MoM in May, versus expectations for a 0.2% rise and following a 0.7% MoM gain in April (revised down from 0.9%), data released by the US Census Bureau on Wednesday showed. Meanwhile, Core Retail Sales rose by 0.5% MoM, below the expected gain of 0.8%, while April’s figure was also revised lower to a gain of 0.4% from 0.6% previously. The Retail Control, meanwhile, was stagnant in May and remained unchanged versus expectations for a 0.5% rise, while April’s figure was revised lower to a 0.5% gain from 1.0% previously.

US policymakers revised PCE inflation to 5.2% for this year, from 4.3% previously. Also seen at 2.6% in 2023, 2.2% in 2024. Growth for this year, on the other hand, has been downwardly revised to 1.7% from 2.8%.

Other Developments

Powell successfully cooled down market fears. US government bond yields sharply retreated, with that on the 10-year Treasury note currently at 3.29%. Wall Street, on the other hand, managed to end the day with gains. The Nasdaq Composite was the best performer, up 2.5%, while the DJIA added 1% and the S&P 500 recovered 1.46%.

The Japanese Prime Minister Fumio Kishida noted that he expects the Bank of Japan to continue efforts to meet the price target. The BOJ is having a monetary policy meeting at the end of the week.

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