Oil reverses recovery moves as China-led optimism fades, markets await key central bankers

After an upbeat start to the key week, the risk profile fades optimism as the Chine-inspired risk-on mood fails to get many takers while the Fed policymakers push back against dovish bias. Additionally weighing on the risk profile could be the cautious mood ahead of multiple central bankers’ panel discussion at the Riksbank event.

The mildly sour sentiment joined a rebound in the US Treasury yields to probe the US Dollar bears, which in turn exerted downside pressure on the risk barometer pair AUDUSD. Further, GBPUSD was also on the same line as inflation woes in the UK supersede upbeat prints of the second-tier data. 

Gold prices also struggle around a seven-month high while Brent oil snaps a two-day uptrend. That said, the US equities closed mixed and so did their Asia-Pacific counterparts. However, the shares in Europe and the UK appear directionless during the initial hour of trading.

Cryptocurrencies also failed to ignore the US dollar rebound as BTCUSD and ETHUSD struggle around monthly highs.

Following are the latest moves of the key assets:

• Brent oil retreats to $79.00 after two-day uptrend, down 0.85% at the latest.
• Gold buyers struggle to keep the reins around the multi-day high below $1,900.
• USD Index bounces off the seven-month low, mildly bid near 103.20 by the press time.
• Wall Street closed mixed and challenged stocks in the Asia-Pacific region, as well as the equities in Europe and the UK.
• BTCUSD and ETHUSD remain firmer around $17,200 and $1,320 in that order.

China, Fed talks probe optimists

While China’s border reopening triggered an upbeat mood on Monday, talks of heavy Covid numbers and fears of more virus spread during the festive season in Beijing reversed the previous optimism.

On the other hand, early signals of the US inflation allowed the Federal Reserve policymakers to reiterate their hawkish bias and triggered mild risk aversion. Additionally, economic slowdown fears in Eurozone and the West, as well as in China, keep the sour sentiment on the table.

As a result, the US Treasury yields recover from a three-week low and allowed the US Dollar Index to bounce off the lowest levels since early June. The same probes buyers of Gold and Crude oil while also allowing AUDUSD and GBPUSD bulls to take a breather. It’s worth noting that mixed Japan inflation data allowed USDJPY to print the first daily gains in three.

Elsewhere, doubts over the Cryptocurrencies’ latest run-up and looming fears of regulations joined the firmer US dollar to poke the BTCUSD and ETHUSD bulls.

• Strong buy: GBPUSD
• Strong sell: ETHUSD, USDJPY
• Buy: USD Index, USDCAD, Nasdaq, EURUSD
• Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

Central bankers are in focus

Given the round table talks among multiple key central bankers at the Riksbank event, including Fed Chair Powell, BoE Governor Bailey and BoC Governor Macklem, the event becomes crucial for market players to watch for immediate directions. Should the central bankers remain sturdy on their rate hike bias the latest rebound in the US Treasury bond yields and the US Dollar could extend.

May the trading luck be with you!