Dollar recovery loses steam ahead of employment data

Rising US Treasury bond yields continued to help the greenback on Wednesday and US Dollar Index (DXY) registered its biggest one-day gain in a month. The DXY stays in a consolidation phase below 102.50 early Thursday as focus shifts to the ADP’s private sector employment report and the US Department of Labor’s weekly Initial Jobless Claims data. The US economic docket will also feature the Unit Labor Costs data for the first quarter and Eurostat will release the Producer Price Index (PPI) figures for the euro area.

OPEC+ will hold a meeting on Thursday and Reuters reported earlier in the day that the group was looking to come up with a solution to compensate for Russia’s one million barrels per day decline in its output due to sanctions. The barrel of West Texas Intermediate (WTI), which rose to $120 earlier in the week, was last seen losing 1.5% on a daily basis near $113.00.

Meanwhile, St. Louis Federal Reserve Bank President James Bullard said on Wednesday that he was sceptical about recession probabilities. Similarly, Richmond Fed President Thomas Barkin told Fox Business that the latest data or the actions of business executives were not pointing to recession. The benchmark 10-year US Treasury bond yield rose more than 2% on Wednesday and was last seen moving sideways slightly above 2.9%. US stock index futures rise between 0.2% and 0.5%, suggesting that the market mood is improving early Thursday.

EUR/USD lost nearly 100 pips on Wednesday but managed to stage a rebound in the European session. Although the pair trades in positive territory, it stays below 1.0700 so far on the day. European Central Bank (ECB) policymaker Francois Villeroy de Galhau reiterated on Thursday that inflation in the euro area was too high and too broad. “Normalization of the ECB policy is required,” Villeroy added.

GBP/USD reclaimed 1.2500 on Thursday after having suffered heavy losses on Wednesday. The UK markets will be closed on Thursday and Friday. Hence, the dollar’s market valuation should continue to drive the pair’s action.

Following the Bank of Canada’s decision to hike its policy rate by 50 basis points to 1.5%, USD/CAD edged lower toward 1.2600. Falling crude oil prices, however, made it difficult for the commodity-sensitive loonie to preserve its strength and the pair recovered above 1.2650.

After falling to a fresh multi-week low below $1,830, gold reversed its direction and rose toward $1,850. XAU/USD manages to hold its ground for the time being but another leg higher in US yields could weigh on the pair and vice versa.

Fueled by surging US yields, USD/JPY extended its rally toward 130.00. Bank of Japan (BOJ) board member Seiji Adachi argued on Thursday that trying to stem the weak yen by tightening monetary policy would squeeze corporate funding.

Following the decisive rebound witnessed earlier in the week, Bitcoin came under renewed selling pressure and lost more than 6% on Wednesday. At the time of press, BTC/USD was moving sideways a tad below $30,000. Ethereum closed the second straight day in negative territory and lost nearly 10% during that period. ETH/USD is currently moving up and down in a narrow range near $1,800.

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