Dollar stays resilient ahead of key US data, FOMC Minutes

Pressured by the falling US Treasury bond yields, the greenback continued to weaken against its rivals on Tuesday. The risk-averse market environment, however, helped the US Dollar Index limit its losses. The dollar stays resilient against its major rivals early Wednesday ahead of April Durable Goods Orders data from the US. Later in the day, the FOMC will release the minutes of its May policy meeting. The European Central Bank (ECB) will publish the EU Financial Stability Review as well.

Escalating geopolitical tensions between China and the US cause investors to stay away from risk-sensitive assets. Chinese state media said on Wednesday that it recently conducted a military exercise around Taiwan as a serious warning to interactions between the US and Taiwan. Meanwhile, Bloomberg reported on Wednesday that the port city of Tianjin, located near Beijing, locked down a district at the center amid a spike in the number of confirmed coronavirus infections.

US stock index futures trade flat in the early European session and the benchmark 10-year US Treasury bond yield is unchanged on a daily basis at around 2.75%.

During the Asian trading hours, the Reserve Bank of New Zealand (RBNZ) hiked its policy rate by 50 basis points to 2% as expected. Commenting on the policy outlook, RBNZ Governor Adrian Orr said that they were confident households can withstand higher rates and added that they might need to lift the policy rate above the neutral rate, which is estimated to be around 2%-3%. NZD/USD gained traction on the RBNZ’s hawkish tone and climbed above 0.6500 for the first time in three weeks.

EUR/USD touched a fresh monthly high of 1.0750 on Tuesday after ECB President Christine Lagarde said that rates could move into positive territory by the end of the third quarter. The pair stays on the back foot early Wednesday and trades below 1.0700. ECB President Lagarde will be delivering a speech at the World Economic Forum.

GBP/USD snapped a three-day winning streak on Tuesday. The disappointing PMI data from the UK revived fears over a recession in the UK and made it difficult for the British pound to find demand. The pair stays relatively quiet near mid-1.2500s in the European morning.

Gold took advantage of falling US T-bond yields and posted daily gains for the fifth straight trading day before going into a consolidation phase near $1,860.

Bitcoin continues to move up and down in a horizontal channel near $30,000. Ethereum struggles to find direction and extends its sideways grind slightly below $2,000.

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