Dollar holds its ground, eyes on US consumer sentiment data

Following a subdued market action on Thursday, the dollar continued to gather strength against its rivals as the 10-year US Treasury bond yield opened with a bullish gap and tested 1.6% in the Asian session. The US Dollar Index is holding near the 16-month highs it set at 95.26 earlier in the day and investors await the University of Michigan’s Consumer Sentiment Index and September JOLTS Job Openings report. The European economic docket will feature the Industrial Production data. Investors will also keep a close eye on commentary regarding inflation.

Market mood: Wall Street’s main indexes closed mixed on Thursday amid varying performance of major sectors. The Shanghai Composite Index looks to close with small gains on Friday and the Nikkei 225 is up 1%. Meanwhile, US stock index futures are rising between 0.15% and 0.25% in the early European session.

Gold closed the sixth trading day in the positive territory on Thursday but seems to have gone into a consolidation phase above $1,850 on Friday. The technical breakout and the precious metal’s status as an inflation hedge helped XAU/USD post impressive gains this week.

EUR/USD failed to stage a convincing rebound on Thursday and stays on the back foot ahead of the weekend. The policy divergence between the Fed and the European Central Bank (ECB) continues to drive the pair’s action. According to the CME Group, markets are now pricing a 70% chance of a Fed rate hike by June 2022, compared to 60% last week.

GBP/USD slumped to its weakest level in nearly a year early Friday as the uninspiring data releases from the UK made it difficult for the British pound to find demand despite some positive comments on Brexit. The pair is trading in a tight range below 1.3400 on Friday.

USD/JPY climbed above 114.00 on the back of rising US T-bond yields and eyes the multi-year highs it set around 114.70 in late October.

Cryptocurrencies: Bitcoin continues to move sideways around $65,000 after struggling to find direction on Thursday. Ethereum seems to have regained its traction after staging a deep correction mid-week and trades above $4,700.

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