Risk aversion stalls on mixed messages, oil, cryptos rebound on softer USD

The market’s risk profile improved during early Tuesday, after witnessing two consecutive days of stellar pessimism, as mixed comments from Fed speakers and downbeat inflation expectations raised doubts about the inflation woes.

 The upbeat mood probes the US dollar bulls around a two-decade high, which in turn allows commodities and Antipodeans to lick their wounds.

Gold prices rebound from weekly lows whereas the Brent oil pares the biggest daily loss in six weeks. AUDUSD and NZDUSD also paused the previous south run close to two-year lows while USDCAD retreats after rising to the highest levels since late 2020.

BTCUSD bottoms out from a 10-month low whereas ETHUSD also bounce off the lowest levels since late January 2022.

Following is the list of major assets’ latest performances:

• Brent oil recovers from its weekly low while piercing $105.00, up 1.6%.
• Gold pares the biggest daily loss in one week around $1,860.
• USD Index remains sidelined around 103.70 after refreshing two-decade high.
• FTSE 100 rises 1.0% but DAX and EUROSTOXX50 print mild gains of late.
• Dow Jones and S&P 500 declined 1.99% and 3.0% respectively while Nasdaq slumped 4.30% on Friday.
• BTCUSD and ETHUSD both rise around 5.0% and 7.0% respectively by regaining $31,600 and $2380 by the press time.

Bears step aside, not out of the game!

Fed leaders from Atlanta and Richmond raised doubts about the market’s hopes for 75 basis points (bps) of a rate hike the previous day and tamed bearish impulsiveness. The comments got validation from 10-month low US inflation expectations, which in turn pulled the Treasury yields back from a multi-year high.

The consolidation in risk appetite gained support from China as policymakers keep the zero covid pledge on the table, suggesting further efforts to renew optimism in the world’s second-largest economy. Also supportive to the mood is the absence of major negatives from Russia.

As a result, the US Dollar Index (DXY) struggles to extend the previous run-up around a 20-year high whereas prices of gold and crude oil improved. The AUDUSD and NZDUSD joined China’s yuan to pare the latest losses. However, equities in Asia-Pacific and Europe struggle to forget Wall Street losses.

Cryptocurrencies rebound from multi-day low even as a jump in the network transactions and fees probe the bulls.

⏫ 🟢 Strong buy: USDJPY

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

⬆️ 🟢 Buy: USD Index

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

Biden, Yellen and Fedspeak are the key ahead of US inflation

Traders took a sigh of relief after the latest bloodbath in riskier assets. However, the risk-on mood is far from here as markets remain divided over the key inflation readings scheduled for release on Wednesday and their implications.

Ahead of the data, Tuesday’s speeches from US President Joe Biden, Treasury Secretary Janet Yellen and a few Fed policymakers will offer short-term directions. Should the language remains cautious, signaling fears of inflation and economic growth, the US dollar could regain the upside momentum. The same will weigh on the prices of commodities and Antipodeans which are yet to get out of the woods. Cryptocurrencies, however, seem to test the short-term key supports and may hesitate in case of bearish impulse.

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