Dollar struggles for traction amid mixed markets, US data eyed

The US Dollar Index is consolidating the overnight rebound around 104.00 in early European trading this Tuesday, as Asian stocks struggled for traction amid a mixed market mood. The US stock futures also reflected the same cautious trait, fluctuating between gains and losses so far. The narrative that the Fed rate hike bets have cooled off amid growing worries of a sharp economic slowdown remained in play. Stronger than expected US Durable Goods and Pending Home Sales data, however, hinted at a healthy American economy, which could withstand big rate increases by the Fed.

Meanwhile, markets weighed on China’s commitment to continue with monetary policy support, as Beijing and Shanghai reported zero new covid cases after four months. The latest tech sell-off, led by the negative news for Tencent Holdings, kept investors on the edge. Amid a damp mood, the safe-haven demand for the US bonds is back, which is prompting a pullback in the US Treasury yields. The benchmark 10-year US yields are down 0.50% on the day at 3.18%, having hit a day high of 3.22% on Monday.

Traders also remain cautious ahead of a slew of speeches from the ECB policymakers and US Consumer Confidence data due for release later on Tuesday. The main event risk of this week, however, remains Wednesday’s policy panel between the Fed, BOE and ECB Chiefs at the annual ECB Forum in Sintra, Portugal.

EUR/USD is stuck in a tight range below 1.0600, unable to find any impetus from the latest Reuters report, citing that the ECB may unveil a new bond-buying scheme to cap yields/spreads at its July policy meeting. ECB President Christine Lagarde is due to speak at the ECB Forum on Central Banking at 0800 GMT.

GBP/USD is moving back and forth in a 25-pips range below 1.2300, as GBP traders remain wary amid looming Brexit risks. UK Foreign Minister Liz Truss said on Monday that they don’t rule out using Article 16 further down the line. Meanwhile, “as expected the Northern Ireland protocol bill passed its first hurdle, with MPs voting 295 to 221 in favor despite heavy criticism from some Conservative backbenchers, including former Prime Minister Theresa May, who said the move is illegal and unnecessary,” The Guardian reported.

USD/JPY keeps its volatile trading intact while within a defined range above 135.00, tracking the sentiment around yields and the dollar.

Gold is staging a decent comeback above $1,825 ahead of the anticipated G7’s decision to ban imports of Russian gold to tighten the sanctions squeeze on Moscow.

Bitcoin is defending the $20,000 threshold, madly bid on the day. Ethereum is up 0.50% on a daily basis, battling $1,200.

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