Dollar on the defensive with yields after US CPI-led blow, awaits PPI

The record-run on Wall Street failed to inspire the Asian traders, as the region’s indices trade in the red amid widening regulatory curbs from China and escalating tensions over the impact of the Delta covid variant on the economic growth. China released a five-year plan calling for greater business regulation as Beijing pursues a crackdown, per Bloomberg. The futures tied to the S&P 500 index also trade marginally lower on the day.

The American dollar remains on the back foot across the board, consolidating the US inflation-led drop while the Treasury yields also lick their wounds. Easing Fed’s tapering expectations and strong US bond auction knocked off the yields alongside the dollar on Wednesday.

Softening US Consumer Price Index (CPI) in July, especially the core figures supported the Fed’s view that inflation is transitory while reducing reduced concerns about an imminent pullback in the Fed’s monetary policy support.

Gold is looking to extend the previous rebound above $1750. WTI is sidelined around $69, preserving most of Wednesday’s advance after the White House said that it would not call on US producers to increase crude output.

Across the fx board, most majors are stuck in thin trading ranges amid the dollar’s downside consolidation, awaiting the US Producer Price Index (PPI) and Jobless Claims data for fresh trading impetus.

The Antipodeans remain on the backfoot, with AUD/USD bearing the brunt of covid lockdown extensions across Australia, currently trading in lows near 0.7360 while the Kiwi also flirts with lows around 0.7030, despite rising RBNZ Inflation Expectations. NZ PM Jacinda Ardern said the nation is simply not in a position to a full reopen just yet.

EUR/USD is holding the higher ground, looking to extend the recovery above 1.1750 while GBP/USD keeps its range below 1.3900 amid looming Brexit concerns and downbeat market mood, which weighs on the higher-yielding pound. Cable traders remain on the defensive ahead of the critical UK Q2 Preliminary GDP data. Also, of note remains the Kingdom’s Manufacturing and Trade figures.

Meanwhile, USD/JPY remains capped below 110.50 amid weaker Treasury yields. USD/CAD hovers around 1.2500, modestly flat on the day.

Cryptocurrencies remain in the red, with Bitcoin keeping its range around $45K. SEC Chair highlights crypto and DeFi trading platforms may be violating securities laws.

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