Caution prevails ahead of all-important US inflation

Risk-aversion extends into the European session this Friday, as investors follow the cautious mood from Asia and the US overnight. Uncertainty over the new Omicron variant combined with concerns over the implications of the Fed’s faster tapering keeps the market unnerved.

The Asian equities are in the red while the S&P 500 futures are trading almost unchanged on the day. The US dollar eases across the board heading into the crucial US inflation release, which is expected to prompt the Fed to accelerate its pace of tapering next week. The US Treasury yields, however, rebound, with the 10-years’ re-attempting the 1.50% level.

Amidst other news, China’s indebted property sector concerns continue to escalate, as the real estate giant Evergrande Group was officially labeled as a defaulter. Meanwhile, the US Senate voted 59-34 to pass the bill to raise the debt ceiling next week.

Across the G10 fx space, the commodity currencies made a comeback, with AUD/USD emerging the strongest. The appreciation in the Chinese yuan, in the wake of policy support, underpins the aussie.

USD/CAD is holding the higher ground above 1.2700, as the US dollar and WTI trade on the back foot. The US oil tumbled towards $70 on Thursday amid China’s property sector woes and Omicron-led strict measures imposed in major economies.

USD/JPY is trading around 113.50, bouncing in tandem with the Treasury yields, as traders ignore a spike in the Japanese Wholesale price inflation.

EUR/USD is consolidating around 1.1300, vulnerable amid the Fed-ECB monetary policy divergence. The euro fell sharply after Reuters reported that the ECB is planning to boost its QE purchases when it meets next week.

GBP/USD is defending 1.3200, undermined by the Omicron and Brexit-led economic woes, which douse BOE’s December rate hike expectations. All eyes remain on the UK monthly GDP and Industrial Production data.

Gold is back in the red, looking to test the critical $1,760 support area, with all eyes on the US inflation numbers. The US Consumer Price Index (CPI) is seen higher at 6.8% YoY in November vs. 6.2% booked previously.

Bitcoin is attempting a bounce towards $50,000, as a fresh bid wave seems to have gripped the crypto market.

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