Dollar rises as jittery markets fear bubbles, await Fed officials’ speeches

After a risk-on Monday, markets are on the back foot on Tuesday following a bubble warning from China. The Fed’s dismissal of higher yields boosts the dollar and contrasts the approach from other central banks. Bitcoin is moving up while gold and oil retreat. Speeches from Fed officials are eyed.

Bubble? Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission warned about bubbles in foreign markets and properties, contributing to a downturn in Asian stocks and US futures. The “turnaround Tuesday” has come after shares rallied on Monday, greeting the new months with optimism.

The US ISM Manufacturing Purchasing Managers’ Index jumped to 60.8 in February, indicating rapid growth. The Prices Paid component leaped above 80, implying inflationary pressures.

US ten-year yields have remained contained around 1.40%, allowing markets to recover on Monday but enough to support the dollar. Tomas Barkin, president of the Richmond branch of the Federal Reserve, dismissed concerns about higher returns on US debt and focused on the fact that ten million Americans are out of work.

Fed Governor Lael Brainard and stands out among speakers on Tuesday, ahead of Chair Jerome Powell’s speech on Thursday. The world’s most powerful central bank stands out among its peers – officials at the European Central Bank have signaled they are ready to act to push yields lower. EUR/USD is under pressure, nearing 1.20. Preliminary Consumer Price Index figures from the eurozone for February are set to remain subdued.

The US Senate will reportedly pick up President Joe Biden’s $1.9 trillion stimulus bill on Wednesday. The upper chamber is set to strip a minimum wage hike out of the House’s legislation, but the final scope of relief is unclear.

Gold extended its downfall, changing hands at around $1,720 at the time of writing. Higher US yields and growing interest in cryptocurrencies have made gold less attractive to some investors.

The Reserve Bank of Australia left its interest rates unchanged as expected, one day after intervening in markets and scooping up Australian debt.

Canada publishes Gross Domestic Product figures for the fourth quarter on Tuesday, with a slowdown on the cards. WTI Crude Oil has stabilized around $60 ahead of the OPEC+ meeting on Thursday. Russia is reportedly seeking an increase to petrol production while Saudi Arabia would like to cap output.

Bitcoin climbed back to around $49,000, benefitting from interest from Citibank among others. Ethereum and XRP lag behind.

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