US dollar, yields retreat on hawkish hopes from ECB, sentiment remains sluggish

Financial markets affected by news on June 9 2022

Global markets turn dicey as pre-ECB anxiety joins fears of economic recession. The risk-aversion failed to underpin the US dollar as yields retreat, as well as expectations of the ECB’s hawkish actions.

The greenback’s weakness failed to recall buyers of gold while crude oil bears the burden of fresh covid-led activity restrictions in China.

USDJPY eases from multi-year high and Antipodeans also eased amid cautious mood. Further, equities in the Asia-Pacific region remained sluggish as monetary policy normalization bring recession woes along.

Cryptocurrencies snap two-day downtrend amid broad USD weakness, ignoring challenges due to OP token’s hack.

Following is the list of major assets’ latest performances:

  • Brent oil snaps two-day uptrend while reversing from the highest levels since March, down 0.45% around $122.00 at the latest.
  • Gold stays pressured at around $1,850, paring the previous advances.
  • USD Index dribbles around 102.60, mildly offered amid softer yields.
  • FTSE 100 drops 0.20 but EUROSTOXX50 and DAX are down around 0.35% and 0.50% respectively amid market pessimism.
  • Wall Street benchmarks posted the week’s first losses on Wednesday, led by 1.08% daily loss of the S&P 500.
  • BTCUSD and ETHUSD gain around 1.0% as buyers flirt with $30,500 and $1,800 of late.

Risk-aversion continues

Wall Street triggered the risk-off mood amid fears of economic slowdown as the hawkish central bank actions loom, as well as OECD’s downgraded growth forecasts. The inflation fears also contributed to the market’s pessimism after the White House hints at a firmer US CPI, up for publishing on Friday.

The risk-off mood extends in Asia as Shanghai and Beijing dialed back some of the latest unlock measures after witnessing a fresh spike in virus cases. 

Amid these plays, the US Dollar Index (DXY) pares the previous day’s losses while the Treasury yields also dwindled. However, neither the commodities nor Antipodeans, not to forget equities, could cheer the softer greenback and bond-buying.

Brent oil prices snapped a two-day uptrend while reversing from the three-month high, which in turn allowed USDCAD to remain firmer. The EURUSD pair, on the hand, remains sluggish as traders have high expectations from the ECB and fear disappointment.

BTCUSD and ETHUSD consolidate weekly losses even as 20 million Optimism Tokens got hacked. The reason for cautious optimism at the crypto front seems to take clues from a regulatory change in the US, suggesting more user-friendly norms to arrive.

ECB will entertain traders ahead of US inflation

Moving on, the market’s anxiety is likely to prevail as the European Central Bank (ECB) is up for ending the bond purchases and provides hints for a July rate hike, which is mostly priced in. Even so, economic forecasts and ECB President Christine Lagarde’s speech will be crucial to watch.

While the US dollar is likely to bear the burden of the hawkish ECB on Thursday, the hopes of a firmer US CPI could renew the greenback buying on Friday. 

In both cases, the equities and cryptocurrencies are likely to remain pressured but there is room for the USDJPY to rise further.

⏫ 🟢 Strong buy: USDCAD, USDTRY and USDCNY

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD

⬆️ 🟢 Buy: USD Index, USDJPY

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

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