Market’s risk-off mood recedes ahead of key data/events

Global traders took a sigh of relief as yields retreated from the multi-year high, taking the US dollar with it. The consolidation phase also cheered the BOE’s rejection of intervention while paying little attention to the BOJ and the PBOC moves.

On the same line are the recent softer US statistics and inflation expectations, weighing on the USD Index at the 20-year high.

The greenback’s weakness allowed commodities and Antipodeans to pare the latest losses amid a light calendar and cautious mood ahead of the US CB Consumer Sentiment and Durable Goods Orders. Gold bounces off a two-year low while the USDJPY retreats around its 24-year top. Further, GBPUSD also licks its wounds at the all-time low whereas oil prices recover from the eight-month low.

Cryptocurrencies also cheer the cautious optimism ahead of important data, as well as a speech from Fed Chair Jerome Powell.

Following are the latest moves of the key assets:

• Brent oil rebounds from an eight-month low, up 1.4% near $85.00 at the latest.
• Gold picks up bids towards $1,645 resistance while printing 0.90% daily gains at the latest.
• USD Index retreats to 113.50 after refreshing the multi-year high to 114.52 on Monday.
• DAX, Eurostoxx and the FTSE are all printing mild gains as we write.
• Wall Street closed in the red led by the Dow Jones’ 1.11% daily loss.
• BTCUSD rises to a fresh two-week high near $20,000 while ETHUSD adds nearly 4.0% to around $1,385 by the press time.

Risk-on is far from here!

Although the easing in yields and the US dollar allowed equities and commodities to pare recent losses, the global markets remain nervous as central banks remain hawkish and stay ready to intervene if needed. Also keeping traders on their toes was the latest threat from Russian Security Council suggesting the readiness to use nuclear weapons if required. 

BOJ announced another unscheduled bond-buying and the PBOC also showed readiness to intervene while the BOE preferred to wait for more signals before jumping on the table. That said, the RBNZ and the Fed remain on their pre-set path, as per the latest comments from the respective policymakers. Further, the US inflation expectations ease but the market’s bets on the hawkish BOE actions are on the rise.

Elsewhere, chatters that the OPEC+ will be forced to cut output and the Russia-Ukraine tussles will add more filters to the oil supplies allowing the Brent oil to rebound from the lowest levels since January. It should be noted that the fears surrounding China, however, restrict the recovery moves of gold and crude oil prices. 

On the other hand, the record volume of Bitcoin shorts enabled the BTCUSD and ETHUSD to keep the latest corrective bounce.

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

US data, Fedspeak and risk factors are the key

With the top-tier US data on the cards, as well as Fed Chair Powell’s speech, the odds of witnessing a fresh selling in the US session can’t be ruled out. The same could renew the US dollar buying and drag the other majors down. It should be observed that ECB President Lagarde is also up for a speech that may as well defend the Euro but could fail if Powell repeats his hawkish words.

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