US inflation amplified fears of economic slowdown, central bank aggression

The risk profile worsened after the US CPI jumped to the highest levels in four decades. Also adding to the sour sentiment was the Bank of Canada’s (BOC) 100 bps rate hike. 

The US dollar cheered it all to refresh its 20-year high but EURUSD couldn’t lose the parity as traders brace for the EU’s quarterly economic forecasts.

AUDUSD managed to stay positive on strong inflation and employment data. However, the USDJPY appeared the biggest runner among the G10 currency pairs as yields rallied.

Elsewhere, the prices of gold dropped nearly 1.0% whereas crude oil remained depressed around the lowest levels in three months.

Additionally, BTCUSD and ETHUSD also reversed the previous day’s corrective pullback amid a risk-off mood.

Following are the latest moves of the key assets:

• Brent oil fades bounce off three-month low, down 1.15% intraday near $100.00.
• Gold reverses the corrective pullback from yearly bottom with 1.0% daily loss to $1,718.
• USD Index stays firmer at the highest levels since 2002, up 0.48% intraday near 108.53 by the press time.
• FTSE 100 is down nearly 0.70% intraday while STOXX50 fall 0.30% intraday. Further, DAX bucks the trend with nearly 0.20% gains.
• Wall Street marked another day with below 1.0% losses on Wednesday.
• BTCUSD and ETHUSD both lose near 1.5% as bears attack the $20,000 and $1,100 levels at the latest.

Recession ahead!

A 40-year high US inflation number widened the US Treasury yield curve inversion and Spread market fears of looming economic slowdown. The same propelled the market bets over the higher interest rates by the key central banks.

With this, the USD Index rose to the fresh high since 2002 while EURUSD also flirted with the lowest levels in two decades but defended the parity level. AUDUSD, on the other hand, cheered strong figures of consumer inflation expectations for July and strong employment change, as well as the lowest Unemployment Rate since 1974, to recall the buyers.

It’s worth noting that China’s repeated efforts to please markets, with headlines suggesting more stimulus and talking down covid fears, also restricted the downside moves of the Antipodeans.

Gold stayed pressured around the yearly low amid a firmer US dollar and the crude oil failed to extend the previous day’s bounce off three-month bottom amid concerns surrounding lower future demand.

On a different page, cryptocurrencies dropped back to the bearish road towards the yearly low as market fears reversed the previous corrective pullback.

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

⬇️ 🔴 Sell: DAX, FTSE 100, gold, BTCUSD

US PPI, Retail Sales eyed

Looking forward, risk catalysts could keep the haven, mainly the US dollar, on the front foot as economic woes join hawkish Fed bets. However, today’s US PPI and Friday’s Retail Sales will be crucial before going all-in for the greenback’s another rush towards a refreshing multi-year high. It should be noted that the quarterly economic forecasts from the European Union (EU) could also be watched for immediate directions as EURUSD flirts with the parity.

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