Yields stay pressured, markets remain dicey as traders await Fed’s Powell
Treasury bond yields remain pressured in the US despite the recently downbeat data as traders struggle to digest the heavy dose of rate hikes given during the week. Not only do the Fed but the SNB and BOE also try to battle inflation. However, the BOJ’s exceptional inactions, widely anticipated though, keeps the yen offered.
The US dollar, however, recovers as traders brace for Fed Chair Jerome Powell’s speech, as well as the Monetary Policy Report that comes in handy once a six-month. The resulted moves propel USDJPY with a double-barrel attack and weigh on the AUDUSD. Further, prices of gold hold lower grounds but oil improves.
Equities track Wall Street’s losses while the cryptocurrencies remain firmer amid more good news from individual fronts.
Following are the latest moves of the key assets:
- Brent oil snaps a three-day downtrend while bouncing off a fortnight low, up 1.0% around $120.00.
- Gold drop half a percent while staying pressured at around $1,850.
- USD Index pares weekly losses around 104.50, up 0.48% at the latest.
- FTSE 100 gains 1.0% but DAX and EUROSTOXX50 are hesitant to rise despite posting nearly 0.70% intraday gains by the press time.
- Wall Street benchmarks remained in the red on Thursday.
- BTCUSD and ETHUSD both gain around 3.0% as buyers flirt with $21,000 and $1,100 in that order.
Lack of clarity favors USD, bonds
The western push for higher rates as a measure to battle inflation contrasts with the Asian central banks’ resistance to copying the moves. The same joins supply-chain bottlenecks and covid woes to challenge the fragile economic growth and underpin the safe-haven demand of the US dollar, as well as Treasury bonds.
Bank of Japan (BOJ) maintained its status quo but managed to utter the word “FX” for the first time in its monetary policy report, which in turn suggests an alternative way to tame the dropping yen. People’s Bank of China (PBOC) and the Reserve Bank of India (RBI) are also on the same line despite hesitantly announcing a few smaller rate hikes of late.
The US dollar run-up appears fishy as traders look for aggressive words from Powell to keep the greenback on their radar, else the yields are likely to trigger the much-await pullback move.
That being said, the USD strength joins market pessimism to weigh on the Antipodeans and commodity prices. However, crude oil braces for further upside as the US calls oil refiners’ meetings to manage the supplies and prices despite Russia’s refrain from altering the oil-for-ruble scheme.
News from a European airline to start accepting Bitcoin as payment battles with the US Treasury Secretary Janet Yellen’s push for more regulations on cryptocurrencies. Ether also portrays the relief rally amid cautious optimism in the e-currency markets.
⏫ 🟢 Strong buy: USDJPY, USDTRY and USDCNY
⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD, Brent oil
⬆️ 🟢 Buy: USD Index, USDCAD
⬇️ 🔴 Sell: DAX, FTSE 100, gold, BTCUSD
Powell could end the busy week on a thoughtful note
Be it the Fed’s bi-annual monetary policy report or Powell’s speech, nothing is likely to offer any major fresh move from the US central bank. Even so, the strength of the Fed’s hawkish bias will be important to gauge for forecasting future moves although the policymakers have turned down hopes of 100 bps rate hikes.
Elsewhere, further surging of bond prices might put a floor under the gold prices and can renew the metal’s buying it remains sluggish around a yearly low. The same can help the Antipodeans recover some of the latest losses. However, the trend reversal is too far and the hold of pessimism is strong enough to keep traditional safe-havens, like the US dollar, to stay firmer.
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