Growing concerns over Delta covid strain, inflation lift US dollar, Fedspeak eyed

Investors witness a quiet start to a big week, with Friday’s Nonfarm Payrolls the key event risk. The market mood remains tepid amid growing concerns over the rapid spread of the Delta covid variant. Australia tightened restrictions to stem the spread of the more potent Delta strain. Japanese PM Suga said that his government is on high alert as Tokyo COVID-19 cases rise.

Despite another record close on Wall Street last Friday, the Asian stock markets trade mixed, struggling to maintain the momentum. Markets reassess the Fed’s next monetary policy move amid softer-than-expected US PCE inflation data and improving economic outlook. Investors also continue to monitor progress on US President Joe Biden’s bipartisan $1.2 trillion infrastructure deal.

The US dollar firms up amid a cautious mood, although the further upside remains capped amid weaker Treasury yields. AUD/USD hits 0.7600, shrugging off Australian covid woes while USD/JPY drops towards 110.50 amid falling yields.

GBP/USD is the strongest across the board, trading close to 1.3900 as the UK remains on track to reopen on July 19. Despite the UK political jitters, easing tensions over the EU-UK sausage war also offer support to the GBP traders. Matt Hancock’s resignation from the Health Minister’s post due to harsh criticism for not adhering to the covid protocols. British former finance minister Sajid Javid is appointed as the country’s health minister.

Meanwhile, EUR/USD remains on the back foot below 1.1950, closely following the US dollar’s price action amid a scarce EU and US economic docket. Gold’s rebound is gaining momentum, as bulls recapture the $1780 mark.

Bitcoin stalls its two-day recovery rally just shy of the $35,000 level amid a resurgence of institutional demand.

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