Sour sentiment, yields renew US dollar demand, prices of gold, oil drop

The turnaround Wednesday failed to unseat the bears for long as fears of recession and hawkish central bank actions renew the market’s pessimism on Thursday. The risk-aversion also took clues from China and Russia, as well as the UK, to propel the yields and the US dollar.

The greenback’s fresh run-up towards the 20-year high resumed the downtrend of major currencies pairs, commodities and Antipodeans. Among them, AUDUSD and NZDUSD were the biggest losers amid concerns over Beijing’s economic struggles. Also keeping the Pacific majors depressed was mixed statistics at home.

Elsewhere, gold pares the biggest daily jump in six months while crude oil snaps a two-day rebound amid the market’s rush for the US dollar.

Cryptocurrencies remained pressured but the losses are limited as Lightning Lab and institutional buyers renew recovery hopes.

Following are the latest moves of the key assets:

• Brent oil retreats after two-day’s failed attempts to bounce, down 1.35% intraday near $87.80.
• Gold drops back towards yearly low while printing 0.80% intraday losses near $1,646.
• USD Index renews run-up towards the two-decade high, up 0.85% on a day around 113.65.
• DAX and Eurostoxx both lose near 1.5% each while the FTSE is down 2.3% as we write.
• Wall Street closed with notable gains led by Nasdaq’s 2.05% upside.
• BTCUSD bears struggle to keep reins around $19,400 whereas ETHUSD declines more than 1.0% to revisit the sub-$1,350 area.

Reversing the corrective bounce

The Bank of England’s (BOE) surprise bond buying triggered the risk-on mood and triggered the much-needed bounce in major currencies versus the US dollar. However, the UK government’s resistance to changing the Chancellor and his recently criticized policies recalled the bears.

On the same line were the rising doubts about the PBOC and softer data concerning inflation and sentiment from Australia and New Zealand. Furthermore, Russia’s hesitance to retreat from annexing Ukraine and European Commission’s readiness for more sanctions on Moscow amplified the risk-off mood.

Also adding to the sour sentiment is the central bankers’ readiness for more aggressive rate hikes even at the cost of economic slowdown.

All of the above seemed to have pushed the World Bank Chief to expect global stagflation and a recession in the Eurozone.

Talking about the cryptos, the Lightning Lab’s preparedness to Bitcoinize the US dollar and gradually increasing institutional investors’ interest in cryptos challenge the BTCUSD and ETHUSD sellers.

⏫ 🟢 Strong buy: AUDUSD

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq, USDJPY

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

US GDP, central bankers eyed

While inflation numbers from Germany could offer immediate directions to the market, most likely to the south, the final readings of the US Q2 GDP and comments from multiple central bank policymakers from Europe, the UK and the US may gain major attention. Above all, geopolitical headlines and the bond market moves are crucial. Overall, the bears are likely to keep control and favor US dollar bulls.

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