U.S. Inflation Data and Central Bank Decisions Stir Up Market Dynamics
13 July 2023
Yesterday was a remarkable day in the market with key economic indicators being released. U.S. inflation data came in at 3% on a yearly basis, falling below the expected 3.1%. The lower-than-anticipated inflation rates reverberated across the market, contributing to a tangible weakness in the U.S. dollar.
On the central banks' front, monetary policy decisions were announced in New Zealand and Canada. In an expected move, the Reserve Bank of New Zealand held its rates unchanged, maintaining its current monetary policy stance. Across the Pacific, the Bank of Canada chose a different path, raising its interest rates by 25 basis points. Despite this anticipated rise, the Canadian dollar turned out to be one of the weakest currencies on the market yesterday.
As we shifted focus to the United Kingdom, GDP figures came in better than expected. The UK economy declined by 0.1%, showing resilience against the predicted drop of 0.3%. As for today, market watchers will be keeping a keen eye on the U.S. PPI inflation and unemployment claims data.
Moving onto the currency market, the strongest performers before the start of the European session were the antipodean currencies: the New Zealand dollar and the Australian dollar. The Japanese yen, however, took the opposite route, emerging as the weakest currency. Interestingly, this comes after most yen pairs marked their sixth consecutive bearish day.
Equity indices also painted a significant picture. Yesterday's trading session was particularly noteworthy for U.S. indexes. The S&P 500 made new long-term highs, while the Dow Jones and NASDAQ followed suit, the latter breaking out of an ascending triangle pattern.
With the weakening of the U.S. dollar, major currency pairs such as EURUSD saw an uptick, while USDJPY and USDCHF experienced a significant drop. The latter is currently trading at new long-term lows, and the outlook remains bleak.
On the commodities front, the weaker dollar proved to be a boon. Precious metals such as gold and silver saw a pleasant upswing, and the oil market wasn't left out either. Mid-term buy signals are currently noticeable across these commodities, hinting at potential opportunities for commodity traders.
In summary, yesterday's market movements reflected the influence of key economic data and central bank decisions. The coming days will shed more light on whether these trends will hold or shift dramatically.