US dollar rebounds amid covid-led risk-off mood, US PCE inflation in focus

Escalating coronavirus concerns have revived the global growth concerns, weighing heavily on the market mood. The US CDC set out new guidelines, reimposing the mask mandate while Japan is likely to extend the state of emergency to more prefectures, including Osaka.

The Asian stock markets are in a sea of red while the S&P 500 futures shed 0.85%. The risk-off mood has rescued the US dollar from the pain induced by the dovish Fed-induced pain as well as by a big miss on the US Q2 Prelim GDP. Markets also reacted negatively to disappointing Amazon’s Q2 earnings results.

The US Treasury yields reverse previous gains amid a flight to safety in the bonds, shrugging off the progress on US President Joe Biden’s bipartisan $1.2 trillion infrastructure deal. The US Senate remains upbeat on prospects for a $1 trillion bipartisan infrastructure bill, which cleared an important procedural hurdle by a vote of 67-32 on Wednesday.

Across the G10 fx space, the kiwi dollar remains the main laggard so far this Friday amid a broad US dollar’s rebound. AUD/USD eased back below 0.7400 despite a slowdown in virus surge in New South Wales.

EUR/USD is trading under pressure after facing rejection just shy of the 1.1900 barrier. The weakness in the Treasury yields seemingly limits the downside in the currency pair. The EUR traders also await the preliminary German and Eurozone GDP release for fresh trading impetus. Also, of note remains the bloc’s inflation data.

Meanwhile, GBP/USD remains pressured toward 1.3800 as the worsening market mood offsets the optimism over the Brexit issue and falling covid cases in the UK.

Gold is in a bullish consolidative mode, holding near ten-day highs of $1832, with further gains dependent on the US Core PCE inflation release. WTI is battling the $73 mark, on the backfoot even though tighter supplies worries loom.

Bitcoin fails to resist once again above $40,000 amid a generalized cautious mood.

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