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01/06/2023 - 08:21 UTCThe U.S. dollar continues to trade in a tight range against most major currencies on Wednesday, with the USDX ending the day with minor gains of 0.17%. Against the Turkish Lira, the dollar continues to hit record high levels as during yesterday’s session the USD/TRY pair climbed to 21.10 level and ended the session at 20.86. Other emerging pairs such as the USD/ZAR, the USD/INR and the USD/MCN ended yesterday’s session with moderate gains.
The U.S debt ceiling drama seems to come to an end as U.S house of representatives passed a bill to suspend the $31.4 trillion debt ceiling on Wednesday, to avoid a catastrophic default. The legislation now must be sent to the Senate, which must enact the measure and get it to President Joe Biden before Monday deadline when the federal government is expected to run out of money to pay its bills.
U.S stocks pointed lower on Wednesday as investors kept a cautious eye on the debt ceiling developments and the weak manufacturing figures in China. Anxiety over China spilled over into broader Asian markets, given their dependence on the country as a trading hub. On the other hand, Japanese stocks were also encouraged by strong economic data, as first quarter capital spending surged more than expected, pointing to a potentially higher revision for first quarter economic growth data.
China’s official manufacturing purchasing manager’s index was 48.8 in May way below the expectations and indicates contraction, and the post-pandemic rebound of the second largest economy in the world raising concerns also on oil demand as it is the largest oil importer.
Market participants now look to the release of the flash Eurozone CPI print for a fresh impetus. Later in the day investors will take cues from the US economic docket, featuring the ADP report on private-sector employment and the ISM Manufacturing PMI. This, along with speeches from Fed members, the US bond yields and the broader risk sentiment, should influence the dynamics and contribute to producing some price activity ahead of the US NonFarm Payrolls report on Friday.
The EUR/USD pair traded modestly flat just below 1.0700 on Wednesday’s session closing the day 0.36% lower.
The consumer inflation readings out of the two large Eurozone economies France and Germany on Wednesday dented European’s Central Bank rate hike expectations. The headline CPI in France fell to 6,0% in May, missing the 6,4% forecast while German’s CPI fell to 6.1% YoY rate, relieving the pressure on the ECB to continue hiking the interest rates.
On Wednesday Fed Governor Philip Jefferson said that pausing rate hikes at the next FOMC meeting would offer time to analyse more data before deciding about the extent of additional tightening. Furthermore, the US House of Representatives voting in favour of a bill to suspend the debt ceiling.
Gold prices posted a moderate increase on Wednesday ending the session 0.39% higher, extending a recovery from two-month lows amid recent expectations that the Federal Reserve might hold interest rates steady in June, while a bill to raise the U.S. debt ceiling drew closer towards passing after being approved by the House of Representatives.
The trend offered by Philadelphia Fed President Patrick Harker, of a possible pause in rates increasing in June gave some relief to gold prices which sank to two months lows earlier this week amid expectations of more pressure for higher interest rates.
Oil prices hit four-weeks lows on Wednesday ending the session 2.61% lower after weak manufacturing data from China which is the world’s largest crude importer. The data outcome raised fears about the demand growth in the second half of the year.
Market participants will watch the upcoming June 4 meeting of OPEC+ the Organization of the Petroleum Exporting Countries and allies including Russia, while analysts do not expect OPEC+ to announce further cuts at this meeting. The U.S. crude inventory balance rose by 5.202 million barrels during the week ended May 26, according to the API.
U.S main indices closed down posting minor losses on Wednesday as the deal to raise the federal debt ceiling headed for a vote in Congress, while unexpectedly strong labour market data fears the market participants that the Federal Reserve might hike interest rates again in June. The US Tech 100 and US 500 ended the session 0.78% and 0.47% lower respectively while US 30 posted minor losses of 0.31%.
The U.S. House of Representatives voted in favor of a bill to suspend the debt ceiling late Wednesday and the deal now heads to the Senate for approval, but the chance of a default in the world’s largest economy appears to be receding swiftly.
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