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MTrading Team • 2022-04-12

Strong yields, risk-off favor USD, gold ahead of US inflation

Strong yields, risk-off favor USD, gold ahead of US inflation

Risk-aversion continued during the first trading day of Wall Street, also prevailing in early Europe on Tuesday, as market players escalate bets on faster monetary policy consolidation by major central bankers led by Fed. 

Fears of an increasing geopolitical crisis in Ukraine and China’s strict lockdown due to the coronavirus outbreak added extra strain to the sentiment. Furthermore, the cautious mood ahead of the US inflation data for March and this week’s monetary policy meetings by the European Central Bank (ECB) and the Reserve Bank of New Zealand (RBNZ) also keeps traders risk-averse.

The stock sell-off also drowned cryptocurrencies wherein the ETHUSD and the BTCUSD were major losers.

It’s worth observing that the oil prices remained under pressure despite the geopolitical crisis challenging the demand-supply matrix.

Following is the list of major assets’ latest performances:

  • BRENT OIL consolidates recent losses around $100.00, up 1.50% after refreshing monthly low.
  • GOLD stays mildly bid around $1,960 after rising to the fresh high in four weeks.
  • USD INDEX remains firmer around the 23-month high after recently crossing the 100 rate.
  • NASDAQ and S&P 500 lost over 1.5% each while Dow Jones dropped around 1.2% on Monday.
  • DAX loses over 2.0% and FTSE 100 drops 0.40% as it breaks 7,550 level.
  • BTC/USD rises 1.5% to regain the $40,000 threshold while ETH/USD gains 1.0% to jump back above $3,000 rate.
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Risk-aversion everywhere

Be it stocks or commodities, not to forget cryptos and Antipodeans, global markets witnessed risk-off on Monday and the US dollar cheered it. 

That said, the US Treasury yields gained major attention by rising to the highest since late 2018 but a 7.0% fall of the ETHUSD also kept bulls at the bay. On the same line, tech-heavy Nasdaq dropped over 2.0% and took S&P 500, as well as Dow Jones with it as investors remain wary of costlier money in the future. Additionally, an unofficial start of the US earnings season for Q1 2022 and a light calendar also allowed bears to keep the reins.

The mood remains the same during Asia-Pacific sessions and also weighs on the European equities during the early hours, as the UK and Germany printed welcome numbers on jobs and inflation at the latest.

Brent oil lost 2.0% before the latest rebound from the monthly low amid fears that the Ukraine-Russia woes will join covid jitters to exert additional pressure on the supply chain issues, as well as the oil flow.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETH/USD

⬆️ 🟢 Buy: USD Index, gold, silver

⬇️ 🔴 Sell: Brent oil, DOW JONES, S&P 500, BTC/USD, DAX, FTSE 100

US CPI is the key

Regardless of the latest pre-CPI anxiety in the market, the risk appetite is likely to remain weak as price pressures may continue to build due to geopolitical and covid issues. 

The same can keep downing the equities and cryptos but the earnings season and cautious optimism of the major policymakers, suggesting the reflation woes as not permanent, may help trigger the intermediate jitters.

Overall, the US dollar is likely to remain firmer and can probe gold buyers now and then even if the traditional safe-haven status of the yellow metal can lure traders. Further, other commodities and riskier assets like cryptos may also witness extra selling pressure until surprisingly softer US inflation figures offer an intermediate bounce.

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