Negative impact of risk appetite on dollar countered by rising yields

The risk-positive market environment makes it difficult for the dollar to find demand in the second half of the week but rising US Treasury bond yields continue to help the currency limit its losses against its major rivals. Ahead of mid-tier data releases from the US – weekly Initial Jobless Claims, Existing Home Sales and Philadelphia Fed Manufacturing Survey, the US Dollar Index holds above 93.50.

Macro data: The data from the euro area showed on Wednesday that the annual Consumer Price Index remained steady at 3.4% in September as expected. In Canada, the CPI climbed to 4.4% from 4.1% and beat the market expectation of 4.3%. The Federal Reserve’s Beige Book showed that the US economy continued to grow at a “modest to moderate” pace in September and early October. “Many firms raised selling prices indicating a greater ability to pass along cost increases to customers amid strong demand,” the publication further revealed.

Wall Street: The S&P 500 Index gained 0.37% and stays within a touching distance of the record-high it set at 4,545 in early September. The Dow Jones Industrial Average rose 0.43% and the Nasdaq Composite closed virtually unchanged. It’s also worth noting that US stocks futures are down between 0.3% and 0.4% in the early European session, suggesting that investors could look for an opportunity to book their profits ahead of the weekend. Additionally, the Nikkei 225 Index is down more than 1.5%. Meanwhile, Reuters reported that the Chinese real-estate giant Evergrande secured an extension on the defaulted $260 million worth of bonds.

The benchmark 10-year US Treasury bond yield, which closed the previous four days in the positive territory, is staying relatively quiet around 1.65%.

EUR/USD’s slightly bullish bias remains intact but the pair seems to have gone into a consolidation phase around mid-1.1600s. The dollar’s market valuation is likely to remain the primary driver of the pair’s action.

GBP/USD staged a downward correction after the CPI data from the UK arrived below analysts’ estimate but managed to return to 1.3800 area. The Bank of England’s rate hike expectations support the British pound.

Once again, AUD/USD and NZD/USD capitalized on risk flows on Wednesday and registered impressive gains. A negative shift in market sentiment could trigger an overdue correction in those pairs.

Gold rose 0.7% on Wednesday and clings to small gains above $1,780 on Thursday. Key resistance for XAU/USD aligns at $1,800 and a daily close above that level could bring in additional buyers.

Cryptocurrencies: Bitcoin reached a new record high of $67,000 on Wednesday and edged lower toward $65,000 on Thursday. Institutional demand following the introduction of the first BTC ETF is expected to increase and support Bitcoin. Ethereum also capitalized on the upbeat sentiment surrounding cryptocurrencies and broke above $4,000.

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