Dollar holds steady as market mood sours

In the absence of high-impact macroeconomic data releases, the risk perception became the primary driver of market movement at the start of the week. With major equity indexes in the US turning south after spending the first couple of hours of the session in the positive territory, the US Dollar Index regained its traction and rose 0.27% on Monday.

Risk-aversion became prominent, once again, during the Asian trading hours on Tuesday as the Nikkei 225 and the Shanghai Stock Exchange both fell more than 1%. Later in the day, the ZEW Survey – Economic Sentiment Index for the euro area and Germany, NFIB Business Optimism Index and JOLTS Job Openings data from the US will be featured in the economic calendar. Nevertheless, market participants are likely to stay focused on the market mood ahead of Wednesday’s key US inflation report.

Wall Street: The S&P 500 lost 0.69% and the Dow Jones Industrial Average erased 0.72% on Monday. In addition to Friday’s disappointing jobs report, renewed concerns over Chinese real-estate developers failing to make payments also seem to have caused market participants to take a cautious stance. Pressured by a 1.45% decline in the Communication Services Index, the tech-sensitive Nasdaq Composite lost 0.65%. Major US banks including Bank of America, JPMorgan Chase and Citigroup will be reporting third-quarter earnings later in the week.

Renewed USD strength in the second half of the day forced the EUR/USD pair to close in the negative territory on Monday. The pair remains within a touching distance of the 15-month low it set at 1.1529 while consolidating its losses.

The USD/JPY pair advanced to its highest level since late-2018 and seems to have gone into a consolidation phase above 113.00 on Tuesday. After surging more than 10% in the previous week, the benchmark 10-year US Treasury bond yield touched a four-month high of 1.636%, fueling USD/JPY’s rally.

GBPUSD showed little to no reaction to the UK employment report, which showed that the ILO Unemployment Rate edged lower to 4.5% in August, and continues to move sideways around 1.3600. Further details of the publication revealed that Average Earnings Including Bonuses rose by 7.2% on a yearly basis.

For the second straight trading day, gold fluctuated in a very narrow range above $1,750. Wednesday’s Consumer Price Index (CPI) data from the US could be the next major catalyst for XAU/USD, which currently posts modest losses around $1,760.

AUD/USD and NZD/USD both managed to register gains on Monday supported by rising commodity prices, especially copper.

Cryptocurrencies: Bitcoin renewed multi-month highs at the start of the week and closes in on $60,000. Ethereum trades near $3,500 on Tuesday and seems to be having a difficult time attracting investors, who are focused on the BTC.

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