Market Drivers – US Session – Tuesday, June 14

The American dollar kept advancing on Tuesday, and retains its strength early Wednesday, as fear rules financial markets ahead of the US Federal Reserve policy decision.

Market players had long ago anticipated a 50 bps hike, but on Monday, market talks suggested the central bank may go for a steeper hike of 75 bps. Also, US policymakers will present fresh Economic Projections, which may lead to a sustained aggressive stance, should the new scenario hint at stagflation.

Economic Data

The annual pace of producer price inflation in the US according to the Producer Price Index (PPI) fell slightly to 10.8% from 10.9% a month earlier, below expectations for it to remain unchanged at 10.9%.

The Core PPI showed the annual inflation rate at 8.3%, below the expected 8.6%, while the MoM gain in Core PPI was 0.5%, below the expected 0.6%, but still up from last month’s 0.2%.

The UK released mixed employment data, as the jobless rate rose to 3.8% in April from 3.7% in the previous month, while the number of people claiming jobless benefits fell by 19.7K in May.

Other Developments

Treasury yields continued to rally, with that on the 10-year Treasury note peaking at 3.489%, its highest in over a decade.

Wall Street remained under selling pressure, although the Nasdaq Composite was able to post a modest gain of 0.10%.

ECB’s member Klaas Knot hinted at more rate hikes in October and December, although sticking to a 25 bps move in September.

The EUR/USD pair hovers around 1.0400 while GBP/USD trades at its lowest since March 2020 at 1.1980. The AUD/USD pair extended its slump to 0.6850, while USD/CAD trades around 1.2955 as the poor performance of equities and plummeting gold and oil prices undermined demand for commodity-linked currencies.

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