US dollar weakness pleases others amid mixed concerns

Thursday’s softer US PPI added strength to the market’s belief of receding inflation pressure, highlighting less urgency on the part of the Fed to move aggressively toward neutral rates. With this, the US Treasury yields improved but the USD remained under pressure, as the Fed policymakers continue to resist in welcoming the much-awaited change in the price pressure.

Even so, Antipodeans brace for the best week since late 2020 while gold marks the four-week uptrend. Also, Brent oil ignores downbeat demand forecasts from the OPEC and the IEA while consolidating the previous weekly losses.

It should be noted that the hopes of economic recovery in China recently gained support from the global rating giant Fitch, which in turn offered additional strength to the commodities and linked currencies. Among them, the NZDUSD pair is the biggest winner as traders anticipate hawkish actions from the Reserve Bank of New Zealand (RBNZ) during the next week’s monetary policy meeting. USDJPY stood on the other hand amid firmer yields while GBPUSD also struggles to cheer better-than-expected GDP data.

BTCUSD and ETHUSD also grind higher around two-month top as softer US dollar joins recently positive sentiment on the crypto front.

Following are the latest moves of the key assets:

• Brent oil eyes biggest weekly gain since early May, printing six-day uptrend near $102.50 of late.
• Gold remains pressured at around $1,788 despite printing consecutive four weekly advances.
• USD Index remains pressured near 105.30, close to the six-week low.
• FTSE 100, Eurostoxx and DAX all print gains between 0.50% and 0.80%.
• Wall Street began the day on a positive side before closing mixed.
• BTCUSD and ETHUSD are both directionless daily while taking rounds to $24,000 and $1,900 in that order.

Fedspeak loses credence

Although most of the Federal Reserve (Fed) policymakers wanted to wait for more proof of easing price pressure, markets seem to have accepted the fact that the inflation fears are behind. The same joined downbeat US CPI and PPI, as well as mixed second-tier job and activity data, to weigh on the US dollar. However, chatters surrounding the US-China tension over Taiwan, also relating to the trump era tariffs and phase one deal, join firmer yields to test the greenback bears.

A softer US dollar allows gold prices to remain firmer past the 50-DMA hurdle to refresh the monthly high. The crude prices also benefit from the USD weakness and hopes of China’s recovery, even as the Sino-American tussles join fears of softer energy demand in 2022.

UK’s GDP came in better than forecast but Britain couldn’t avoid technical recession and hence GBPUSD remains on the seller’s radar despite posting weekly gains.

Elsewhere, more BTC mining and participation of extra players join softer US dollar, as well as firmer equities, to restore investor confidence in the cryptocurrencies.

⏫ 🟢 Strong buy: USDJPY

⏬ 🔴 Strong sell: ETHUSD

⬆️ 🟢 Buy: USD Index, USDCAD, Nasdaq

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

US Michigan Consumer Sentiment is the key

Despite witnessing a plethora of releases suggesting the easing price pressure in the US, the hawkish Fedspeak highlights today’s flash readings of the US sentiment gauge for August. Although the consumer confidence gauge is likely to mark an upbeat print, the details surrounding future expectations and inflation part will be crucial to watch for clear directions.

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