The greenback managed to erase a large portion of its losses on the back of recovering US Treasury bond yields on Tuesday but struggled to find demand against its risk-sensitive rivals with risk flows influencing the financial markets. The market mood seems to have turned cautious early Wednesday as investors await inflation data from the euro area and Canada. Later in the day, the Federal Reserve will release its Beige Book.
Macro data: The data from the US showed on Tuesday that Housing Starts and Building Permits declined by 1.6% and 7.7%, respectively, in September. On Wednesday, the People’s Bank of China (PBoC) left its one-year prime rate unchanged at 3.85% as expected. The UK’s Office for National Statistics announced that the Consumer Price Index (CPI) edged lower to 3.1% on a yearly basis in September from 3.2% in August. Furthermore, the Core CPI declined to 2.9% in the same period, missing the market expectation of 3%.
The benchmark 10-year US Treasury bond yield pushed higher during the American trading hours and ended up gaining more than 2% on Tuesday. Currently, the 10-year yield is staying relatively calm around 1.65%, helping the dollar stay resilient against its rivals. In the meantime, the US Dollar Index, which touched a three-week low of 93.50, is fluctuating around 93.70.
Wall Street: The S&P 500 Index closed fifth straight trading day in the positive territory and reached its highest level since early September at 4,520. The Dow Jones Industrial Average rose 0.55% and the Nasdaq Composite advanced 0.7%. US stock index futures are posting modest losses in the early European session. After the closing bell, Tesla will release third-quarter earnings figures.
AUD/USD and NZD/USD were the biggest gainers on Tuesday and they continue to edge higher on Wednesday. A negative shift in risk sentiment could cause these pairs to stage a sharp correction.
EUR/USD rose to its highest level in a month at 1.1670 but dovish comments from European Central Bank officials made it difficult for it to preserve its bullish momentum. The pair seems to have gone into a consolidation phase around 1.1650 on Wednesday.
GBP/USD showed no immediate reaction to September inflation figures and continues to move sideways around 1.3800 as investors assess the probability of a Bank of England rate hike before the end of the year.
Gold climbed above $1,780 on Tuesday but reversed its direction in the second half of the day as it remains one of the most sensitive assets to fluctuations in US T-bond yields. On Wednesday, XAU/USD is staying afloat in the green above $1,770.
Cryptocurrencies: As the trading in the first Bitcoin ETF kicked off on Tuesday, BTC gained more than 3% and stays within a touching distance of all-time highs near $64,000 on Wednesday. Ethereum bulls are still waiting for the ETH to break above $4,000.