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07/09/2023 - 07:42 UTCThe US dollar traded relatively stable on Wednesday, with the USDX posting moderate gains of 0.04% for the day, nonetheless, the index is currently trading at six-month highs. Weak economic data reports from China and Europe earlier this week have investors worry that global growth and risk appetite will remain downbeat, shifting investors to the safe haven of the dollar. In addition, U.S. data released Wednesday showed that U.S. service sector activity grew more than expected in August, fuelling concerns that inflation levels will remain elevated. This turn of events adds further support to the dollar as it encourages a hawkish stance by the Federal Reserve.
A positive momentum in the dollar was also observed in some emerging currency pairs such as the USD/ZAR, that gained 0.26%, the USD/CNH that saw a rise of 0.25% and the USD/MXN that surged by more than 1% for a second consecutive session.
A decline is seen in precious metals so far this week, with gold falling by more than 1% while silver is currently trading early on Thursday, more than 4.5% lower for this week. Part of the move could be attributed to recent strength in the dollar and high Treasury yields as signs of sticky inflation raise chances that the Fed will remain hawkish.
The main US stock indices fell for a second consecutive session on Wednesday, with the US 500, the US 30, and the US tech 100 all declining by 0.69%, 0.65% and 0.85% respectively. Weak performance was seen in Apple whose share price declined by 3.6% after the Wall Street Journal reported, that China had banned officials at central government agencies from using iPhones and other foreign-branded devices.
For Thursday, some price action could be seen upon the release of Italian retail sales, eurozone revised GDP and US crude oil inventories. In the spotlight we also have the US unemployment claims report that is expected to show labor market remains healthy, with initial jobless claims expected to rise slightly to 235,000 from 228,000 the prior week. In addition, FOMC member Harker and several other Fed members could attract some investor attention later in the session.
The EUR/USD pair ended the session on Wednesday almost unchanged ending the session with minor losses of 0.01%. US economic data and risk aversion continue to support the Greenback across the board.
Data from the Eurozone showed a significant decline in German Factory Orders in July, down by 11.7%, and a 0.2% decline in Eurozone Retail Sales in the same month. In the US, the ISM Manufacturing PMI exceeded expectations and boosted the Greenback.
Later today, Jobless Claims and Unit Labor Cost data are due in the US. Also, in Eurozone the Eurostat will release the revised numbers of Q2 employment and GDP data.
Gold extended its retreat to a fifth day on Wednesday as yields climbed and bets for higher-for-longer U.S. interest rates and global growth concerns continued to drive safe-haven flows into the dollar. Gold prices fell for a third consecutive session ending the day 0.49% lower. A rise in the safe-haven rival dollar makes gold more expensive for overseas investors, while higher yields decrease non-yielding bullion’s appeal.
Oil prices settled higher on Wednesday, reversing early declines as market participants anticipated further draws on U.S. crude oil inventory following extended production cuts in Saudi Arabia and Russia. WTI contract on iForex platform rose 0.97% ending the session just above the level of $87.700 per barrel.
U.S. crude oil stockpiles fell by more than 5 million barrels in the just-ended week, petroleum industry group API said in a preliminary report Wednesday that showed a four straight weekly decline in inventory as refiners maxed out fuel processing in preparation for the final hurrah in summer travel. Official inventory data from the U.S. Energy Information Administration is due later today.
U.S main indexes closed lower on Wednesday with the US Tech 100 ending the session 0.85% lower while US 500 and US 30 posted losses of 0.69% and 0.65% respectively, while the benchmark U.S treasury yield rose and the U.S dollar hit its highest in six months after stronger-than-expected U.S services sectors data suggested inflation pressures remain.
Fed Bank of Boston President Susan Collins said that while there are signs of progress in cooling inflation, now is a time for the central bank to proceed carefully when it comes to its next monetary policy steps.
Weighing heavily on Wall Street stock indexes, shares of Apple fell 3.6% after the Wall Street Journal reported that China had banned officials at central government agencies from using iPhones and other foreign-branded devices for work.
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