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MTrading Team • 2022-09-01

Hawkish central bank bets, China propel USD ahead of key catalysts

Hawkish central bank bets, China propel USD ahead of key catalysts

Global markets begin the new-month trading with sour sentiment underpinning the US dollar. Hopes of central banks’ aggression and headlines surrounding China could be linked to the fresh bout of risk aversion.

Treasury yields push the USD back onto the bull’s radar after the recent downbeat performance, which in turn weighed on the prices of commodities and Antipodeans.

Gold and crude both witness selling pressure while EURUSD leads G10 currency pair bears. Further, USDJPY refreshed its 24-year high but hopes of stimulus from China restricted losses of the AUDUSD and NZDUSD.

BTCUSD and ETHUSD also couldn’t ignore the greenback’s strength and rather reversed from the weekly top marked the previous day.

Following are the latest moves of the key assets:

  • Brent oil remains pressured around a one-week low, taking rounds to $96.60 of late.
  • Gold drops for the fifth consecutive day as sellers attack $1,700 by the press time.
  • USD Index stays firmer around 109.00, bracing for the third weekly gain.
  • FTSE drops 0.60% but DAX and Eurostoxx drop more than 1.5% each at the latest.
  • Wall Street marked another day with losses with Dow Jones’ 0.88% daily fall leading the bears.
  • BTCUSD and ETHUSD both lose near 0.80% as the former drops back below $20,000 while the latter flirts with $1,550 at the latest.
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September starts with risk-off mood

Bears are back into motion as rate hike fears join covid woes and geopolitical tensions. Among them, hawkish hopes from the Fed and the ECB are the leading catalysts that fuelled the US dollar, via Treasury yields. Also, China’s worsening coronavirus conditions and resulting lockdowns, as well as the tussles with Taiwan, add strength to the risk-off mood. 

Alternatively, downbeat economics challenges the hopes of faster rate hikes while expectations of China stimulus also test the bearish bias.

Even so, the US dollar regains upside momentum, which in turn appears negative for the rest of the major currencies, not to forget the commodities.

Gold price drops the most to approach the yearly low while USDJPY rose to the fresh high since 1998.

With the US dollar strength and the recession fears, optimism surrounding California’s love for cryptos and positive vibes ahead of the Ethereum Merge failed to keep BTCUSD and ETHUSD bulls on the table.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq

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

All eyes on US ISM PMI, NFP

While the softer risk profile is likely to underpin the US dollar strength ahead of the key US ISM Manufacturing PMI and Friday’s NFP, the second-tier US jobs data and the latest weakness in the ADP Employment Change may probe the greenback bulls. On the same line could be the resistance of the equity sellers amid firmer reports and higher demand.

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