Greenback retreats from multi-year highs ahead of mid-tier data

The global bond selloff continued on Tuesday and the yield on the benchmark 10-year US Treasury bond climbed to its strongest level since late-2018 near 3%. After posting its highest daily close in nearly two years at 101.00, however, the US Dollar Index (DXY) turned south during the Asian trading hours on Wednesday. The European economic docket will feature Industrial Production and Trade Balance data for February. Later in the day, the March inflation report from Canada, Existing Home Sales data from the US and the US Federal Reserve’s Beige Book will be looked upon for fresh impetus. Investors will keep a close eye on Fedspeak as well.

Major equity indexes in the US registered impressive gains on Tuesday as investors shifted their attention to earnings figures. In the early European session on Wednesday, US stock index futures are down between 0.3% and 0.9%, pointing to a souring market mood. The latest intelligence reports from Ukraine suggest that Russia is preparing to increase its military aggression in eastern Ukraine in the coming days. On a positive note, authorities in Shanghai city announced earlier in the day that the coronavirus situation had shown a downtrend in recent days with two city districts having achieved zero infections at the community level.

Meanwhile, Atlanta Fed President Raphael Bostic noted that a 75 basis points rate hike was not on his radar. Reflecting the same sentiment, Chicago Fed President Charles Evans pushed back against the idea of larger than 50 bps rate increases at upcoming policy meetings. Nevertheless, the recent weakness seen in the DXY looks more like a technical correction rather than the beginning of a downtrend as the 10-year US T-bond yield stays flat on the day near 2.95%.

EUR/USD fluctuated in a tight range on Tuesday as rising eurozone bond yields helped the shared currency stay resilient against its rivals. The pair is posting modest daily gains above 1.0800 early Wednesday.

GBP/USD closed the fourth straight trading day in negative territory on Tuesday but managed to stage a rebound toward 1.3050 in the European morning.

USD/JPY touched its highest level in nearly two decades above 129.00 during the Asian session on Wednesday before losing its traction and retreating toward the mid-128.00s. The Bank of Japan (BOJ) announced earlier in the day that it will conduct an unlimited fixed-rate purchase operation for Japanese Government Bonds after the yields opened near 0.25%, threatening the central bank’s upper cap.

The improving market mood and surging US yields caused gold to suffer heavy losses. After falling nearly 1.5% on Tuesday, XAU/USD continues to edge lower on Wednesday and was last seen losing 0.5% at $1,940.

Fueled by risk flows, Bitcoin gained 1.7% on Tuesday and advanced toward $42,000 before going into a consolidation phase near $41,500 on Wednesday. Ethereum managed to build on Monday’s gains and touched a five-day high of $3,132 on Tuesday. At the time of press, ETH/USD was moving sideways at around $3,100.

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