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MTrading Team • 2022-06-29

Risk-aversion intensifies ahead of key central bankers’ discussion

Risk-aversion intensifies ahead of key central bankers’ discussion

Fears of economic slowdown weigh on the risk appetite as traders await Fed, BOE and ECB policymakers’ trifecta attack on market moves during early Wednesday. Adding to the sour sentiment could be the ECB’s early signals of how to end the bond-buying program and comments suggesting an increase in the recession woes.

Risk-off mood favored the US dollar to refresh the weekly top, which in turn drowned prices of gold and crude oil while also directing Antipodeans to the south.

Cryptocurrencies aren’t left behind in conveying the market fears as BTCUSD and ETHUSD print a four-day downtrend.

Following are the latest moves of the key assets:

  • Brent oil snaps four-day uptrend as it reverses from weekly top, down 0.40% at around $117.70 at the latest
  • Gold declines for third consecutive day as sellers attack $1,815 with 0.20% daily loss.
  • USD Index stays firmer at the weekly top surrounding 104.50.
  • FTSE 100 prints mild intraday gains but STOXX50 and DAX are both down over 1.0% by the press time.
  • Wall Street closed with major losses, Nasdaq slumped nearly 3.0%.
  • BTCUSD drops 0.90% to trade around $20,000 while ETHUSD loses more than 1.0% by flashing $1,130.
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US dollar cheers risk-aversion

Be it rising inflation expectations or the chatters surrounding economic setbacks and interest rate hikes, everything contributes to renewing the US dollar’s upside momentum. Adding to the greenback’s strength were comments from the European Central Bank (ECB) signaling economic woes in the bloc, as well as a lack of confirmation on the future rate lifts.

It should be noted that China’s readiness to stabilize the world’s second-largest economy joined talks over the Sino-American trade deal to limit pessimism surrounding the dragon nation.

With this, the US Dollar Index (DXY) extends the previous day’s recovery towards refreshing the weekly top whereas the gold prices drop for the third consecutive day to refresh a two-week low. Further, Brent crude oil snaps a four-day uptrend while reversing from a weekly top while dollars of Australia, Canada and New Zealand have to bear the burden of risk-aversion, as well as the firmer USD.

BTCUSD and ETHUSD also refresh their weekly low as they print losses for the fourth consecutive day. In addition to the broad US dollar strength, a Canadian investment firm's 100% liquidation of the Bitcoin and Ether holdings also drowned the cryptocurrencies.

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD, Brent oil

⬆️ 🟢 Buy: USD Index, USDJPY

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

All eyes on Fed’s Powell

Central bankers walk on the sword’s edge as they’re struggling to tame inflation and also make sure that the economic growth remains less infected due to the monetary policy tightening. The same highlights today’s ECB Forum as Fed’s Powell, ECB’s Lagarde and BOE’s Bailey will jostle over the best route to form ideal monetary policy during today’s panel discussions.

Also important will be the quarterly release of the US Personal Consumption Expenditure (PCE) and final readings of the Q1 2022 GDP.

That said, Powell has recently failed to impress bulls and Bailey couldn’t regain the market’s confidence, which in turn signals the need for more hawkish comments from both the policymakers to keep the USD firmer, as well as revive the GBP. ECB’s Lagarde, on the other hand, has already signaled a measured road to the tightening and hence may not grab much of the attention.

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