Gold leads bears during pre-CPI trading lull

Global markets portray the typical pre-data inaction as traders await the US inflation numbers on Thursday. Even so, the yields recovered and help the US dollar to reverse the previous day’s losses.

Also adding strength to the greenback’s demand are aggressive wagers on the Fed’s next move and the risk-negative headlines surrounding Russia and China.  With this, the gold prices drop back to the bear’s table but crude oil defends buyers as supply crunch fears renew.

Among the major currencies, GBPUSD drops the most amid looming fears of the UK’s market slide. On the other hand are prices of USDCAD and AUDUSD.

BTCUSD and ETHUSD also couldn’t ignore the firmer USD and reverse the previous day’s corrective bounce.

Following are the latest moves of the key assets:

• Brent oil Snaps three-day downtrend to regain $94.00.
• Gold remains offered at around $1,670, printing mild losses on a day of late.
• USD Index picks up bids around the two-week top of 113.60, near 113.30 as we write.
• FTSE and Eurostoxx are both declining nearly 0.30% intraday but DAX prints mild losses at the latest.
• Wall Street closed mildly negative as Nasdaq lost 0.33% and Dow Jones dropped 0.10%.
• BTCUSD drops back to $19,000 while ETHUSD slides beneath the $1,300 threshold.

Risk aversion intensifies at a slower pace…

Although the markets remain risk averse, the pace of pessimism is mild as traders want to confirm the hawkish bias over the Fed’s next move from today’s US CPI data. Even so, Russia’s criticism of the Western alliance with Ukraine and a pipeline leak joins fresh coronavirus fears from China and Eurozone to weigh on the market’s sentiment.

FOMC Minutes and the Fedspeak remain hawkish, which in turn keeps the US dollar buyers hopeful amid the recent improvement in the Treasury yields. Adding strength to the greenback were negative headlines for the European economy and chatters that the British bond market is on the verge of collapsing.

Some of the positives, like China stimulus and downbeat forecasts for US inflation, failed to gain any attention as the Federal Reserve policymakers have clearly shown interest in higher rates, via the latest Minutes and their public speeches.

Cryptocurrencies aren’t immune to the risk-off mood and renew intraday lows despite recently improving market participation and mining numbers.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq, EURUSD

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

US CPI is the key

Although central bankers and risk-negative headlines from Russia/China may entertain the bears, major attention will be given to the US inflation data. Also increasing importance of today’s US CPI is the latest figures of inflation expectations that suggest a cooling pressure on the central bankers. Even so, the policymakers remain determined to hike the rate, which in turn can fuel the US dollar and weigh on commodity prices, if the data remains within manageable boundaries despite easing for September.

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