July 12, 2023: Currencies, Stocks, and Oil Market Wrap

The dollar fell ahead of US inflation data.

The dollar fell, hitting a two-month low on Wednesday, July 12, against other major currencies ahead of the release of US inflation data, while the British pound rose to a 15-month high on expectations that the Bank of England will continue to raise interest rates.

  • USD/JPY: The yen jumped to a one-month high, surpassing 140 against the dollar for the first time in a month, supported by falling US Treasury yields and bets on the Bank of Japan’s monetary policy adjustment at this month’s meeting.

Investors are heavily focused on US inflation data due later today, as it is expected to show that core inflation rose 5% year-on-year in June and provide more clarity on the US Federal Reserve’s steps to tackle inflation.

  • DXY: Ahead of the release of the data, the dollar index, which measures the performance of the greenback against a basket of other major currencies, fell to a two-month low of 101.34, extending losses from the beginning of the week after Federal Reserve officials said the central bank was close to ending the monetary tightening cycle.

EUR/USD: The euro rose to a two-month peak of $1.10365.

  • GBP/USD: Sterling rose to a 15-month high of $1.2970, supported by bets that the Bank of England will have to continue tightening monetary policy to tame British inflation, which is increasing at the highest rate among major economies.

US Treasury yields were under pressure, which supported the yen.

  • NZD/USD: On the other hand, the New Zealand dollar rose 0.47% to $0.6227.
  • AUD/USD: The Australian dollar rose 0.52% to $0.6722.

US Stocks and Indices Performance Review:

US indices closed collectively higher in Tuesday’s session, supported by gains in bank stocks, ahead of the announcement of financial companies’ results and amid anticipation of US inflation data.

Inflation data is due today, Wednesday, while producer prices will be released Thursday.

Results from JPMorgan and other major banks are also expected later this week.

  • US30: The Dow Jones rose by 0.9%, equivalent to about 317 points, achieving its highest daily gain in 3 weeks.
  • US500: The S&P 500 rose 0.7% to close near its highest level in 14 months.
  • USTEC: The Nasdaq Composite Index rose 0.55%, closing near its highest level in 15 months.
  • JPMorgan stock:

JPMorgan Chase rose by 1.6%, its highest close in 16 months after Jefferies Financial raised the stock’s rating to “buy” before the bank’s quarterly results on Friday.

  • Activision Blizzard stock:

Video game maker Activision Blizzard stock jumped 10%, posting its biggest daily gain in a year and a half after a US judge ruled that Microsoft may proceed with its planned acquisition of Activision.

Oil stabilized after a larger-than-expected increase in US crude inventories.

Oil prices were largely stable in early Asian trading on Wednesday, July 12, after data showed a rise in US crude stocks.

Brent crude futures fell three cents to $79.37 a barrel, while US crude fell one cent to $74.82.

Prices were pressured by the rise in US crude stocks by about three million barrels in the week ending July 7, according to data from the American Petroleum Institute. Analysts had expected an increase in oil inventories by 500,000 barrels.

In the previous session, oil rose by about 2%, supported by the dollar’s decline and expectations of increasing global demand for crude.

The IEA expects the current market tightness to continue into the second half of 2023, citing strong demand from China and developing countries and recently announced supply cuts by major exporters: Saudi Arabia and Russia.

Meanwhile, on Tuesday, the US Energy Information Administration expected demand to exceed supply by 100,000 barrels per day in 2023 and by 200,000 in 2024.

Markets are awaiting US inflation data today, Wednesday, searching for clues to the outlook for interest rates, which could lead to a rise in slowing economic growth and reducing oil demand.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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