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The U.S. dollar took a breather on Thursday, slightly retracing from recent gains against most major peers, with the dollar index (USDX) ending the day lower by around 0.20%. Against emerging market currencies, the dollar painted a mixed picture with pairs like the USD/CNH and USD/INR pushing even higher while USD/TRY and USD/ZAR ended the day in the negative.
A move by Japanese monetary authorities to intervene in the foreign exchange market for the first time since 1998, gave a significant boost to the yen. This followed a monetary policy decision by BOJ that kept rates unchanged. The move triggered the biggest one-day decline for the dollar against the yen since March of 2020, to peg the pairing at 142.31.
Sentiment in the crypto markets remains overall negative with the global cryptocurrency market cap close to $0.92T, down by almost -0.77% over the last day, according to CoinMarketCap data. As at 06:00 PM GMT on Thursday, the Bitcoin was trading right below the $19K mark while Ethereum was trading close to $1280.
The main stock indices in both Europe and the US extended their slide on Thursday, while the U.S. 10-year yield hit 3.68%, the highest since February 2011.
On Friday, Flash Manufacturing PMI and Flash Services PMI reports are due from France, Germany, the UK and the US while Canada will publish monthly retail sales and core retail sales data. Later in the day, markets’ attention could be shifted towards a speech by Fed chairman Jerome Powell that is to be held Washington DC where investors will possibly be watching closely for further hawkish remarks.
The EUR/USD consolidated on Thursday, still trading below dollar parity, following a move by the Fed to raise interest rates by 75 basis points on Wednesday and hints that upcoming monetary policy measures by the Fed will continue to be aggressive.
The U.S. central bank issued new projections showing rates peaking at 4.6% next year with no cuts until 2024.
According to several market analysts, the dollar is seen gaining further momentum due to its safe haven properties following further escalation in Ukraine after Russian President Vladimir Putin said he would call up reservists to fight in Ukraine.
Despite tensions escalating at the Ukrainian front, recent strength in the dollar and rising treasury yields seem to be adding pressure on gold prices, keeping them close to their lowest levels since May 2020.
The price of the precious metal is seen fluctuating within a tight range between $1654 and $1688 per ounce over the past week, with investors watching for possible price catalysts, whether it is additional hawkish comments by Fed officials or further escalations in the ongoing conflict in Ukraine.
WTI Oil prices posted a moderate recovery on Thursday, trading at $83.5 per barrel as at 06:38 PM GMT.
Following renewed concerns for more global oil supply disruptions, the European Union is considering an oil price cap, tighter curbs on high-tech exports to Russia and more sanctions against individuals, according to diplomats responding to Moscow's latest provocations.
Oil traders could shift their focus on the Baker Hughes report due on Friday, where data on active US oil rigs could give further insight on the current undersupply issue.
Major stock market indices like the US 500, the US 30 and the US tech 100 posted a third consecutive daily loss on Thursday, as the impact of the Fed’s hawkish stance still seems to be weighing on the markets.
Losses were driven mainly by technology and financial stocks, as investors appear worried that the Federal Reserve's aggressive approach to rein in inflation could trigger a recession.
Shares of the biggest technology and growth companies by market cap, such as Apple Inc, Amazon.com Inc, Tesla Inc and Nvidia Corp fell between 1% and 6% while benchmark U.S. Treasury yields hit an 11-year high. Rising yields weigh particularly on valuations of companies in the technology sector, which have high expected future earnings and form a significant part of the S&P 500.
According to several market analysts, rate cuts are expected to begin only in 2024 while inflation is expected to stay well above the Fed’s 2% target for at least the next two years.
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