Market’s anxiety underpins US dollar rebound, Jackson Hole in focus

Having witnessed a few days of cautious optimism, a typical pre-event caution played its role to recall the US dollar buyers during early Friday. Also weighing on the market sentiment were headlines from China, Taiwan and concerning Iran.

It’s worth noting that oil prices ignored firmer USD to renew upside momentum around a three-week high while gold snapped a three-day uptrend to reverse from the weekly top.

NZDUSD was the biggest loser as RBNZ Governor Adrian Orr sounded cautious during his speech at the Jackson Hole. It should be noted that firmer yields bolstered USDJPY whereas USDCAD and USDCHF were least affected due to mixed catalysts.

Cryptocurrencies remained weak with BTCUSD and ETHUSD retreating from weekly highs.

Following are the latest moves of the key assets:

• Brent oil reverses the pullback from the monthly top, up 0.75% near $101.60 at the latest.
• Gold prints the first daily loss in four, down 0.30% around $1,753 by the press time.
• USD Index regains upside momentum around 108.60, up 0.14% as we write.
• FTSE 100 and Eurostoxx are both printing mild gains while DAX remains directionless at the latest.
• Wall Street closed with notable gains wherein Nasdaq led the bulls with 1.67% daily gains.
• BTCUSD drops 0.60% intraday to $21,450 while ETHUSD falls nearly 2.3% as bears poke $1,650 by the press time.

Risk-off mood prevails

With the recently mixed Fedspeak, anxiety ahead of Fed Chair Jerome Powell’s showdown at the annual Jackson Hole event escalates as the traders want to know how well the Fed can defend rate hikes amid recession fears. Also increasing the Fed-linked fears were recently mixed US data and geopolitical tussles with China, Iran, Turkey and Russia.

On the other hand, the US discard some of the Chinese carrier flights and also tightened ties with Taiwan, which in turn pushed Beijing to react. Taipei increased its military budget to battle with the dragon nation, in case needed, by also hoping to get US support. It should be observed that a fresh covid-led lockdown in a Chinese county near Beijing renewed virus fears and strengthened the risk-aversion.

Elsewhere, US-Iran relations also worsen on Syrian concerns and lashes out hopes of the much-awaited oil deal, which in turn favored the black gold prices amid an otherwise likely downbeat session.

RBNZ’s Orr raised economic concerns while showing readings to lift the rates further. Even so, NZDUSD dropped tracking clues from China and fears of a less hawkish RBNZ.

Talking about cryptos, fears of economic slowdown and expectations that the global policymakers will accept the pessimism to ease on rate hikes seem to join the looming regulatory woes to drown BTCUSD and ETHUSD prices.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq

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

All eyes on Powell, China…

Although the Fed’s preferred version of inflation, namely the Core PCE Price Index, for July is likely to entertain market players on Friday, major attention will be given to Fed Chair Powell’s speech at Jackson Hole. Considering the economic and geopolitical concerns, not to forget the multi-year high inflation, Fed Chair Powell is likely to defend the latest 0.75% rate hike. However, traders are more interested to hear more aggressive rate hikes to keep the US dollar on the front foot, failing to do so can trigger the market’s risk-on mood.

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