Trading sentiment remains unclear early Wednesday amid a lack of major catalysts, as well as the market’s preparations for this week’s top-tier data/events from the UK and the US. The same allows traders to rethink their previous optimism about the lower rates and helps the US Dollar to extend the week-start recovery.
The US Dollar’s recovery joins downbeat EU data and fears about the UK’s economic transition to weigh on the EURUSD and the GBPUSD pair. Further, USDJPY stays on the front foot despite the Bank of Japan’s (BoJ) latest efforts to tame the Yen’s slump.
Moving on, AUDUSD, NZDUSD and USDCAD all justify the US Dollar strength and a softening in the commodity prices whereas USDCHF stays lackluster.
Gold picks up bids to reverse the previous day’s losses on China news, as well as due to the firmer yields, whereas the crude oil remains pressured at the two-month low.
Talking about cryptos, BTCUSD and ETHUSD print the first daily gains in three as traders expect the ultimate victory of the industry players over the US SEC, which in turn will result in higher fund inflow.
Following are the latest moves of the key assets:
A lack of major data/events joined a light newsflow and allowed traders to rethink their optimism surrounding the lower rates on Monday. The fading positivity joined the slightly upbeat comments from the Federal Reserve (Fed) official to underpin the US Dollar’s recovery. On Tuesday, President and CEO of the Federal Reserve Bank of Minneapolis Neel Kashkari defended his hawkish bias while not ruling out further rate hikes if necessary. The policymaker also believed the most likely scenario is that the Fed will maintain current rates, with potential cuts contingent on sustained disinflation.
On the other hand, Bank of Japan (BoJ) Governor Kazuo Ueda said, “BOJ won't necessarily wait until inflation achieves our forecasts in 1.5 to 2 years to raise interest rates.” His comments couldn’t inspire the Yen buyers amid a corrective bounce in yields and broader concerns suggesting a wider divergence between the BoJ and the Fed’s monetary policies for a long time. With this, the USDJPY prints a three-day winning streak while paring the biggest weekly loss since November 2022.
EURUSD justified the US Dollar strength to snap a four-day uptrend the previous day, down so far. In doing so, the Euro pair ignored upbeat prints of Eurozone Retail Sales for March while justifying cautious comments from the President of the Deutsche Bundesbank, Member of the Governing Council of the ECB Joachim Nagel. On Tuesday, ECB’s Nagel said, “If there is more price pressure in the medium-term, ECB must take action against it.” It should be observed that Germany’s Industrial Orders marked a surprise slump of -0.4% MoM for March versus +0.4% expected.
Elsewhere, the UK’s Construction PMI for April improved to 53.0 versus the market forecasts of 50.2 while Halifax House Prices improved to +0.1% for the said month from -1.0% previous readings. The latest improvements in the British data lack the strength to convince the British Pound (GBP) buyers even as the Bank of England (BoE) officials keep drumming the hawkish tune while the overall trend for the major central banks appears calling for lower rates. It should be noted that the GBPUSD pair’s latest weakness could also be linked to the trader’s preparations for Thursday’s BoE monetary policy meeting and Friday’s UK Q1 GDP data, not to forget the US Dollar’s corrective bounce.
Earlier in the day, Chinese state media outlets spread concerns about a cut in the People’s Bank of China’s (PBoC) Reserve Requirement Ratio (RRR) during the second quarter (Q2) of 2024. The news failed to incite any major response but tested the latest selling of the commodities and Antipodeans.
With this, the Dollars of Australia, New Zealand, and Canada remain on the back foot, especially when their respective central bank updates have been mostly dovish. It should be noted that the Reserve Bank of Australia (RBA) kept the benchmark rates unchanged but couldn’t convince the hawks amid a downbeat economic analysis. Further, the Reserve Bank of New Zealand (RBNZ) also failed to promote its hawkish bias in the latest monetary policy updates while the Bank of Canada (BoC) is supporting lower rates of late. Apart from the central bank commentary, the Canadian Dollar (CAD) also bears the burden of the downbeat Crude Oil prices, Canada’s main export item.
Crude Oil remains pressured at the lowest levels in two months even as the US Department of Energy’s (DOE) Office of Petroleum Reserves announced a solicitation for up to 3.3 million barrels of oil for delivery to the Strategic Petroleum Reserve (SPR) in October. Also challenging the Oil sellers is an update from Russian Deputy Prime Minister and Energy Minister, Alexander Novak, who ruled out market chatters that Moscow will increase oil output. That said, the reason for the black gold’s weakness could be linked to the increase in the weekly US oil inventories, per the private survey data of the American Petroleum Institute (API), as well as the US Dollar rebound and a lack of major negatives from the geopolitical front.
Further, Gold price picks up bids to reverse the previous two-week downtrend despite a firmer US Dollar. In doing so, the XAUUSD traders cheer hopes of more stimulus from China and expectations of lower rates from major central banks. Additionally, the downbeat Treasury bond yields also allow the precious metal to remain firmer.
The market is likely to continue being inactive amid a light calendar and an absence of major risk news. However, a slew of Fed officials are scheduled for public speeches and can entertain the momentum traders. That said, market players will seek confirmation of a delayed Fed rate cut, later than the widely-known June timeline, to keep the US Dollar on the front foot ahead of Friday’s US consumer-centric data. That said, major European markets will be closed on Thursday and hence a slight movement in the Euro ahead of the holiday can also be expected, which in turn makes EURUSD pair interesting for trade. Furthermore, the traders' preparations for this week’s top-tier UK data/events will highlight the GBPUSD pair for momentum traders, suggesting a pullback in the prices of late.
May the trading luck be with you!
