The risk appetite remains mixed on early Wednesday even as the fears emanating from the Israel-Hamas war ease. The reason could be linked to the cautious mood ahead of the key US inflation clues and the Fed Minutes, as well as uncertainty about the geopolitical and economic concerns about China.
The market’s lack of clarity joins dovish comments from Reserve Bank of Australia (RBA) Assistant Governor (Financial Markets) Christopher Kent to exert downside pressure on the AUDUSD price, making it post the first daily loss in six so far. Further, EURUSD remains dicey but the USDJPY prints mild gains even as the yields dwindle. Moving on, the NZDUSD drops the most among the G10 currency pairs while USDCAD and USDCHF remain indecisive of late.
Gold Price remains lackluster after retreating from a one-week high the previous day while Crude Oil reverses the previous day’s losses as OPEC Official disrespects energy demand fears surrounding China.
It’s worth noting that the Asia-Pacific shares edge higher while tracing the Wall Street benchmarks amid upbeat growth concerns about China and India, as well as hopes of witnessing more stimulus from China and Japan’s defense of the easy-money policies.
BTCUSD prints a four-day losing streak while ETHUSD drops for the fifth consecutive day amid crypto market fears, as well as the US Dollar’s hesitance in declining further after a five-day losing streak.
Following are the latest moves of the key assets:
Starting with the geopolitical woes, Israel gained strong support from the US and intensified its reaction to the Hamas bombings. However, talks about establishing a human corridor for the Gaza Strip seem to tame the fears emanating from the war and allow the traders to take a breather.
Further, the latest World Economic Outlook report from the International Monetary Fund (IMF) showed a softer 2024 global GDP growth outlook while raising the 2024 global CPI forecast to 5.8% from 5.2% in July. Even so, the details suggest welcome economic growth for India and China. As per the latest IMF forecasts and the recent statistics from China, the Dragon Nation is showing signs of economic recovery and defends optimism in Asia. Adding to this are talks shared by Bloomberg about Beijing’s readiness for a new stimulus of nearly CNY1 trillion ($137.1 billion) and a higher deficit to meet its annual growth target. However, the Asian major’s troubled real-estate developer Country Garden is likely to formally default on a $15 million coupon payment on the offshore debt when its 30-day grace period expires on October 17. The same joins the US-China tension to challenge the sentiment and put a floor under the US Dollar.
On a different page, the Federal Reserve Bank of New York's Survey of Consumer Expectations showed an increase in the US consumers' one-year inflation expectation to 3.7% in September from 3.6% in August, which in turn joined hawkish Fed talks to challenge the optimists.
On Tuesday, Atlanta Federal Reserve President Raphael Bostic was an exception as he said that they don't need to increase rates anymore. On the other hand, New York Fed’s head of monetary policy implementation Roberto Perli said that "Fed rate control tools working well amid recent challenges." Further, Minneapolis Fed President Neel Kashkari stated that they may have to raise rates further if the economy stays too strong whereas Federal Reserve (Fed) Bank of San Francisco President Mary Daly said, “If bond yields are tight, that could be the equivalent of another rate hike.”
It should be noted that European Central Bank (ECB) Governing Council member and Bank of France President Francois Villeroy de Galhau, said that “at this stage further rate hikes not right thing to do,” which in turn prod the EURUSD bulls. On the same line, RBA’s Kent mentioned that the monetary policy is slowing the growth of demand, and inflation.
Moving forward, the final readings of Germany’s inflation data for September will join the US Producer Price Index (PPI) and the Fed Minutes to entertain traders on Wednesday. While a likely easing in the inflation pressure in Germany and the US should favor the riskier assets, hawkish Fed Minutes could tease the US Dollar bulls.
May the trading luck be with you!
