Dollar steadies after Powell-inspired rally, eyes on high-tier US data

Following a sharp upsurge witnessed during the American trading hours on Tuesday, the US Dollar Index staged a correction and seems to have steadied around 96.00 early Wednesday. Investors await November ADP Employment Change and ISM Manufacturing PMI data from the US. FOMC Chairman Jerome Powell will testify before the US House Committee on Financial Services starting at 1500 GMT. IHS Markit will release the final readings of the November Manufacturing PMIs for the euro area, Germany, the UK and the US as well.

While testifying before the US Senate Banking Committee on Tuesday, Powell said that it would be appropriate to accelerate the pace of reductions in asset purchases and added that they would be discussing this matter in the upcoming policy meeting. Powell also noted that it was time to stop using the term “transitory” when describing inflation in the US. Following these remarks, investors are expecting the Fed to remain on the policy-tightening track despite renewed coronavirus fears.

Wall Street’s main indexes suffered heavy losses on Tuesday but US stocks futures are trading in the positive territory in the European morning. Meanwhile, the 10-year US Treasury bond yield is rising more than 1% on the day while staying below 1.5%.

EUR/USD climbed back above 1.1300 after falling sharply to mid-1.1200s late Tuesday. European Central Bank Governing Council member Pablo Hernandez de Cos said on Tuesday that the new coronavirus variant and the inflation spike in the euro area were pointing to a significant negative revision to the 2021 growth forecast.

GBP/USD tested 1.3200 in the American session on Tuesday but managed to stage a decisive rebound during the Asian trading hours. The pair is currently trading in the positive territory around 1.3330.

USD/JPY is holding on to modest daily gains around 113.50 supported by rising US Treasury bond yields. Bank of Japan (BOJ) board member Seiji Adachi reiterated that the BOJ is ready to ease the policy further if needed to support businesses.

Gold fluctuated wildly in the second half of the day on Tuesday. After advancing to $1,808, XAU/USD dropped all the way down to $1,770 in less than two hours. Following a consolidation phase during the Asian session, the pair is edging higher toward $1,790 in the European morning.

Cryptocurrencies: Bitcoin continues to move sideways below $60,000. Ethereum is rising for the fifth straight day on Wednesday and closes in on the all-time high it set $4,867 on November 10.

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