Here is what you need to know on Wednesday, August 3:
The US Dollar Index (DXY) snapped a four-day losing streak on Tuesday as escalating geopolitical tensions allowed safe-haven flows to continue to dominate the financial markets. There seems to be a modest improvement in risk mood early Wednesday with US stock index futures rising between 0.2% and 0.3% and the DXY consolidating its recovery gains above 106.00. The European economic docket will feature June Retail Sales data before the ISM releases the July Services PMI report for the US later in the day. Investors will keep a close eye on political developments and Fedspeak as well.
Despite China's stern warnings, US House of Representatives Speaker Nancy Pelosi has landed in Taiwan, becoming the most senior US politician to visit the country in 25 years. With the initial response, the Chinese Foreign Ministry published a statement, noting that Pelosi's visit seriously violated the sovereignty and territorial integrity. Additionally, China announced that it will hold military exercises, including live-fire drills, in areas surrounding Taiwan from August 4. Earlier in the day, "we want Taiwan to always have freedom with security, we are not backing away from that," Pelosi told a news conference.
In the meantime, Chicago Fed President Charles Evans said on Tuesday that a 50 basis points rate hike would be a reasonable assessment for the September policy meeting if inflation does not improve. These comments helped the US T-bond yields push higher and the benchmark 10-year US yield rose more than 6% on a daily basis and climbed above 2.7% on Tuesday before going into a consolidation phase early Wednesday.
In the early Asian session, the data from New Zealand showed that the Unemployment Rate edged higher to 3.3% in the second quarter from 3.2% in the first quarter. The Participation Rate was virtually unchanged at 70.8% in the same period. NZD/USD declined toward 0.6200 with the initial reaction but recovered above 0.6250 heading into the European session.
EUR/USD pair lost more than 100 on Tuesday and closed the day below 1.0200. The pair is having a difficult time gaining traction in the European morning and fluctuating in a tight range above 1.0150.
GBP/USD fell sharply on Tuesday as the British pound failed to find demand in the risk-averse market atmosphere. The pair stays relatively quiet above mid-1.2100s early Wednesday. The S&P Global will release the final version of the Services and Composite PMı data for the UK later in the session.
Fueled by surging US Treasury bond yields, USD/JPY rose decisively from the two-month low it set at 130.43 and gained nearly 200 pips on the day. The pair fluctuates in a narrow channel above 133.00 on Wednesday.
Gold turned south on rising US yields and the broad-based dollar strength on Tuesday and close in negative territory for the first time since last Wednesday. Nevertheless, XAU/USD seems to have regathered its bullish momentum and was last seen advancing toward $1,770.
Bitcoin continues to move sideways near $23,000 and Ethereum is struggling to find direction while holding steady above $1,600.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.