Greenback stages comeback ahead of critical bond auction, inflation figures

The dollar is gaining ground as US bond yields rise early on Wednesday after falling on Tuesday. Tension is mounting ahead of US inflation figures and a critical Treasury auction. Bitcoin holds onto gains, oil consolidates lower and the BOC is eyed.

Yields: Returns on the benchmark ten-year yields remain the critical driver for markets. Their fall on Tuesday fueled a rally in Wall Street and pushed the dollar down, while they are edging up on Wednesday, causing the reverse to happen. All eyes are now on an auction of ten-year bonds due in the American session.

Ahead of that offering, US Consumer Price Index figures for February are set to show a minor increase in price pressures. Federal Reserve officials dismissed any inflation as a result of base effects and transitory. A sharp rise would force a rate hike and boost the dollar.

Stimulus: One of the critical upside drivers or inflation expectations and yields comes from President Joe Biden’s $1.9 coronavirus relief package. The Senate’s modified version of the bill is set for a vote in the House, en route to signing it into law. Stimulus checks and aid to states are due out immediately afterward.

The Bank of Canada is set to leave interest rates unchanged and may also comment on the increase in returns on Canadian debt amid better growth prospects. WTI Oil is trading around $63, off the highs seen earlier in the week and allowing USD/CAD to bounce above 1.2670.

EUR/USD has slipped below 1.19 amid fresh dollar strength and EU regulators are set to approve Johnson & Johnson’s single-shot COVID-19 vaccine.

Gold is changing hands above $1,710, holding onto its recovery despite the fresh rise in US Treasury yields.

Bitcoin is trading around $54,000, below the highs near $56,000 but still boasting a market capitalization of around $1 trillion. Ethereum is above $1,800 and XRP below $0.47.

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