Just as bloogers and analysts began writing about Monday's sharp market rebound, indices around the world are back in the red, yet off their lows. One relationship that's increasingly taking hold is the inverse relation between indices and the US dollar. Interestingly, USD remained weak despite the overnight sell-off in Tokyo and early Europe. JPY, EUR and CHF are the strongest, while GBP backs off its highs following stronger than expected inflation data. 120 pip gain was locked in the EURUSD trade.
One clue on whether Monday's bounce will last was in the announcement of a White House infrastructure plan. It surely faces a tough test in Congress but it highlights the administrations priorities; or more aptly, the lack of an emphasis on deficit reduction.
It came along with fresh White House projections which are undoubtedly optimistic and still foresee a nearly $1 trillion deficit next year. With the potential for more stimulus in the pipeline and continued high military spending, the bond market is beginning to worry about debt issuance.
US 10-year yields ticked another basis point higher Monday to 2.86% and as high as 2.89%. There is a sudden focus on borrowing levels and it seems almost inevitably that some type of shudder – small or large – will hit stocks once 3% is breached.
A pair of big drivers towards or away from that level is likely on Wednesday with US CPI and retail sales data.
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD hovers around 1.0700 ahead of German IFO survey
EUR/USD is consolidating recovery gains at around 1.0700 in the European morning on Wednesday. The pair stays afloat amid strong Eurozone business activity data against cooling US manufacturing and services sectors. Germany's IFO survey is next in focus.
GBP/USD steadies near 1.2450, awaits mid-tier US data
GBP/USD is keeping its range at around 1.2450 in European trading on Wednesday. A broadly muted US Dollar combined with a risk-on market mood lend support to the pair, as traders await the mid-tier US Durable Goods data for further trading directives.
Gold: Defending $2,318 support is critical for XAU/USD
Gold price is nursing losses while holding above $2,300 early Wednesday, stalling its two-day decline, as traders look forward to the mid-tier US economic data for fresh cues on the US Federal Reserve interest rates outlook.
Crypto community reacts as BRICS considers launching stablecoin for international trade settlement
BRICS is intensifying efforts to reduce its reliance on the US dollar after plans for its stablecoin effort surfaced online on Tuesday.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.