Markets turn dicey but US dollar extends recovery, gold falls further south

Traders remain cautious during the second full-market day as the US policymakers praised Fed hawks as they tighten the belt to tame inflation. The risk appetite, however, appears mixed as the US Treasury yields stay firmer but the equities refrain from further downside.

US Dollar, on the other hand, stretches the previous day’s rebound amid hopes of faster Fed rate hikes with eyes on US ISM Manufacturing PMI and further Fedspeak.

Gold prices bear the burden of the market’s indecision and firmer USD to refresh a fortnight's low. Alternatively, Brent oil consolidates the biggest daily fall in three weeks as geopolitical concerns join Russia’s likely relief to observe OPEC guidelines, at least for now, as well as geopolitical concerns challenging the energy supplies.

AUDUSD cheers better-than-expected Aussie Q1 GDP while USDJPY rose the most among the G10 currency pairs amid firmer US bond coupons and a strong greenback.

Elsewhere, cryptocurrencies remain pressured as traders doubt the demand side pulls amid looming fears of regulations and the market’s cautious sentiment.

Following is the list of major assets’ latest performances:

• Brent oil resumes its run-up towards two-month high, up 1.10% around $117.50.
• Gold drops to two-week low as sellers attack $1,830 support.
• USD Index rises for the second consecutive day to regain 102.00 level.
• FTSE 100 and EUROSTOXX50 print mild gains whereas DAX rises 0.30% by the press time.
• Dow Jones and S&P 500 both dropped around 0.60% while Nasdaq slipped 0.41% on Monday.
• BTCUSD and ETHUSD both lose around 1.0%  while struggling to defend $31,500 and $1,950 levels respectively.

King Dollar keeps the driver’s seat, equities dwindle

Having reversed from a one-month low, the US Dollar Index (DXY) remains on the front foot as various Fed speakers back the 50 bps rate hikes post-September. Also keeping the greenback firmer were comments from Fed Board of Governors member Christopher Waller and Atlanta Fed President Raphael Bostic. It should be noted that US President Joe Biden and Treasury Secretary Janet Yellen’s support for the Fed’s higher rates offered extra strength to the US dollar, while also weighing on the riskier assets.

It’s worth noting that the better-than-forecast China PMI and hopes of further stimulus tried to defend gold buyers but could not as strong USD and firming expectations of higher interest rates, coupled with the upbeat yields, directed the metal towards a fresh two-week low.

AUDUSD regains upside momentum as Australia’s Q1 GDP rose past the downbeat forecast. Further, USDJPY was also on the bullish line, rising the most among leading quotes as yields and DXY offered a double-barrel strength to the yen pair.

Gold dropped for the third consecutive day as markets resume rush to the USD while oil prices regained upside momentum as US President Biden eyed more hardships for Moscow and Saudi Arabia hinted at Russia’s likely exclusion from OPEC+ production cut rules.

BTCUSD couldn’t cheer Panama’s welcome and the ETHUSD also renewed downside moves as traders tracked Wall Street’s weakness.

⏫ 🟢 Strong buy: USDCAD, USDRUB and USDCNY

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

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

US ISM PMI, Fed speakers and ECB’s Lagarde eyed

Having witnessed an active start of the day, global markets may witness further moves as the US is up for publishing May’s ISM Manufacturing PMI while multiple Fed policymakers are also lined up for speech. ECB President Christine Lagarde may also justify her stand after witnessing all-time high Eurozone inflation.

Elsewhere, China’s post-covid unlock and the Western moves to punish Russia over Ukraine invasion may act as additional catalysts to watch for clearer directions.

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