King Dollar cheers flight to safety ahead of US Nonfarm Payrolls

Global markets turned heavily risk-off late Thursday after the Bank of England (BOE) raised concerns of double-digit inflation and economic challenges emanating from the same. The headlines were not only detrimental to the Sterling but also renewed fears that the prices pressures will push Fed toward faster rate hikes, which in turn allowed the greenback to reverse the post-Fed losses.

The risk-aversion wave drowned Wall Street and negatively affected the prices of gold, as well as Antipodeans. Brent oil, however, managed to stay firmer amid headlines from OPEC+ and Europe. Cryptocurrencies also plummeted as traders leave the riskier assets in search of the US dollar.

The mood remained downbeat during early Friday with eyes on the monthly jobs report from the US and Canada, as well as any confirmations on how inflation will push the Fed towards more than 50 bps of rate hikes.

Following is the list of major assets’ latest performances:

• Brent oil prints three-day uptrend around $111.00.
• Gold extends the previous day’s losses below $1,900.
• USD Index stays firmer around 103.60 after refreshing two decade high.
• FTSE 100 print mild losses while DAX and EUROSTOXX50 drop around 1.2% each.
• Dow Jones and S&P 500 slumped  3.12% and 3.56% respectively while Nasdaq nosdived almost 5.0%.
• BTCUSD and ETHUSD both remain pressured around the lowest levels since February, close to $36,000 and $2,700 in that order by the press time.

Economic pessimism recalled USD bulls

No sooner than the BOE highlighted risks of economic recession, the global traders rushed to the US dollar in search of safety as the Fed has previously rejected 75 basis points (bps) of a rate hike on grounds of cautious optimism. The inflow allowed the USD to reverse the Fed-inspired losses and raised concerns of a faster trajectory toward normal rates, as well as reducing the quantitative easing.

As a result, Wall Street benchmarks plunged and the Antipodeans also couldn’t stay immune. Further, gold prices snapped a two-day rebound by reversing from the weekly top whereas Brent oil prices managed to cheer the OPEC+ verdict, as well as Europe’s readiness for more sanctions on Russia.

Cryptocurrencies had an extra reason to worry, other than the USD strength, as some Twitter handles flashed calls of liquidation of MicroStrategy’s Bitcoin investment. 

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: Nasdaq, silver, AUDUSD, GBPUSD

⬆️ 🟢 Buy: USD Index, DOW JONES, S&P 500

⬇️ 🔴 Sell: DAX, FTSE 100, brent oil, gold, ETH/USD, BTC/USD, USD Index

US NFP eyed for fresh impulse

Market sentiment remains sour during early Friday, weighing equities in Asia and Europe while keeping the US dollar firmer. However, the magnitude of risk-aversion slowed down of late as traders await confirmation of recently escalated calls about the Fed’s drastic actions.

Given the US Federal Reserve’s (Fed) expectations of improving inflation and employment crunch over time, today’s US NFP will be closely observed to see whether the headline job number eases, as expected, or not.

Should today’s employment data hint at a cooling employment market, the risk-on could return to the table. However, the same may not last long considering the broad economic fears and ongoing monetary policy tightening by the major central banks. 

Hence, the USD may witness a pullback in case the NFP arrives softer but the bulls won’t leave the table for long.

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