US dollar tracks strong bond yields amid market pessimism, hawkish Fed bias

The market’s risk-off mood intensified on Friday as recession woes joins the firm belief over the Fed’s aggression.

The sour sentiment underpinned the US dollar and drowned prices of commodities and Antipodeans.

GBPUSD has an additional negative in the form of the UK Retail Sales as it pokes the yearly low marked in the last week. USDJPY, on the other hand, bucked the trend amid fears of BOJ intervention.

Prices of gold dropped to the fresh yearly low but those of oil remained less bearish amid supply crunch concerns.

Elsewhere, BTCUSD and ETHUSD also remain pressured around the weekly lows.

Following are the latest moves of the key assets:

• Brent oil struggles to defend the recovery from weekly low, up 0.20% near $91.60 at the latest.
• Gold drops for the fourth consecutive day as bears approach the lowest levels since April 2020.
• USD Index rises to weekly high above 110.25, up 0.51% intraday by the press time.
• DAX and Eurostoxx both print nearly 2.0% intraday loss while FTSE declines around 0.20% on a day as we write.
• Wall Street also witnessed losses led by Nasdaq’s 1.43% daily upside.
• BTCUSD stays defensive around $19,700 while ETHUSD drops to $1,470.

Risk profile deteriorates as traders brace for FOMC

Firmer US data underpinned expectations that the Fed won’t refrain from further stronger rate hikes and the same fuel the US dollar of late. Not only the Fed but hawkish concerns surrounding the majority of the Western central banks also contributed to the market’s rush towards the US dollar.

It should be noted that the recession fears and higher rates fuelled the US Treasury bond yields, which in turn offered extra strength to the greenback.

On the other hand, downbeat UK retail sales and Japan’s readiness for intervention seemed to have played a mixed role, with GBPUSD leading bears and the USDJPY being an exception. Further, RBA’s Lowe also sounded hawkish but couldn’t renew the AUDUSD buying due to the pair’s risk barometer status.

Gold took offers to refresh the 29-month low but Brent oil seemed to cheer the fresh geopolitical tension between Tajikistan and Kirgizstan.

Cryptos fail to cheer optimism surrounding Ethereum’s Merge amid broad risk-aversion.

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

Second-tier US data in focus

First readings of September’s University of Michigan Consumer Sentiment Survey will be in focus for the intraday as traders seek more clues to support their hawkish bias for the next week’s Fed meeting. Also in the spotlight will be the chatters surrounding the European energy crisis and yields.

May the trading luck be with you!