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Denis Sergienko • 2022-09-15

Yields underpin US dollar rebound, weigh on commodities amid dicey session pre-US data

Yields underpin US dollar rebound, weigh on commodities amid dicey session pre-US data

Global markets remain risk-averse as Fed bets ignore softer US inflation data. Also challenging the risk profile are economic fears surrounding China and the anxiety ahead of next week’s Fed meeting.

The sour sentiment did propel the US Treasury bond yields and the US dollar while exerting downside pressure on the commodities and Antipodeans. Among them, USDJPY was the longest runner among the G10 currency pairs whereas NZDUSD remains the least affected due to New Zealand data.

Gold drops towards the yearly low and the crude oil also reverses from the weekly top as the risk profile deteriorates.

Cryptocurrencies manage to rebound amid optimism surrounding Ethereum’s Merge while stocks in Europe/UK print mild gains on the opening.

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Following are the latest moves of the key assets:

  • Brent oil returns to the bear’s radar, down 0.35% intraday near $95.00 at the latest.
  • Gold drops for the third consecutive day as bears approach the yearly low while printing mild losses near $1,688.
  • USD Index regains upside momentum targeting the 110.00 threshold.
  • DAX and Eurostoxx both print mild gains while FTSE adds nearly 0.80% amid stimulus hopes.
  • Wall Street also witnessed a mildly positive day led by Nasdaq’s 0.74% daily upside.
  • BTCUSD stays defensive above $20,000 while ETHUSD dribbles around $1,650.

Fed hawks ignore easy inflation, China roils the mood

Although the US PPI traced the downbeat CPI to tame inflation fears, the hawkish Fed bets didn’t ease, which in turn renewed the US dollar buying during early Thursday. Adding to the market’s fears were concerns that China’s economy will have harder days than in 2020.

Not only the US dollar but the yields also improved in response to the market’s fears, which in turn propelled USDJPY prices. The NZDUSD pair, however, failed to portray the risk-off mood on strong New Zealand Q2 GDP.

Gold is all set to refresh the yearly low under $1,700 whereas oil couldn’t cheer supply crunch fears amid likely depletion in the demand during the second half of the year.

Crypto inflows increased as Ethereum’s Merge hit the floor, which in turn helped BTCUSD and ETHUSD to extend the previous day’s rebound from the weekly low.

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

US Retail Sales in focus

After witnessing no major positive reaction to the softer inflation data, US dollar bulls brace for the Retail Sales print with eyes on the further upside. Also likely to entertain the traders will be the weekly jobless claims and the monthly trade numbers to forecast the Fed’s next move. Given the likely firmer outcome, the US dollar may remain on the front foot and can exert downside pressure on the riskier assets including commodities and Antipodeans.

May the trading luck be with you!