Upbeat market mood weighs on dollar ahead of critical inflation figures, Delta eyed

The market mood is relatively upbeat, with the dollar edging lower and other assets rising ahead of the release of US inflation figures. Concerns about the Delta variant persist, especially as cases rise in the US. Cryptocurrencies remain on low ground.

US stock indexes hit a record high once again on Monday. US 10-year Treasury yields have been extending their gradual recovery, hitting 1.37% early on Tuesday and keeping USD/JPY above 110. However, the greenback is losing some ground against other currencies.

The highlight of the day is US Consumer Price Index figures which are set to show a moderate drop of headline inflation to 4.9% but an increase of Core CPI to 4%. Analysts will try to assess how much of the price rises are related to the reopening and which ones are persistent and warrant action from the Federal Reserve. The drop in used cars’ costs and lumber hint that CPI may have peaked.

Fed member Raphael Bostic is set to speak later in the day ahead of Chair Jerome Powell’s all-important testimony on Wednesday. Their colleague Thomas Barkin said that the recent improvement still does not warrant tapering the bank’s bond-buying scheme. Barkin marked an employment-to-population level of 59% as a trigger.

The Delta variant is causing a surge in US COVID-19 cases, which have risen by 94% in the past two weeks. Authorities rejected giving a third dose for now.

EUR/USD is holding above 1.1850 as European countries slap more restrictions. Spain, France, Portugal and the Netherlands stand out with rapid increases in cases.

GBP/USD is trading closer to 1.39 despite concerns that Britain’s reopening on Monday could result in a further rise in covid cases. The Bank of England releases its Financial Stability Report.

AUD/USD is hovering around 0.75, benefiting from USD weakness and despite the extension of Sydney’s lockdown.

OPEC+ countries are reportedly in no rush to reach a deal on increasing output as prices have failed to surge. WTI is hovering around $74. Gold is changing hands above $1,800, benefiting from the upbeat market mood.

Cryptocurrencies are mixed, with Bitcoin recovering to $33,000 but Ethereum sliding toward $2,000. Ripple’s XRP is changing hands above $0.60.

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