Here is what you need to know on Wednesday, September 28:
The greenback regathered its strength in the late American session on Tuesday and stretched higher during the Asian trading hours on Wednesday with the US Dollar Index touching a fresh multi-decade high of 114.70. The risk-averse market environment amid rising geopolitical tensions and growing fears over a global economic slowdown helps the dollar outperform its rivals mid-week. In the second half of the day, the US economic docket will feature Goods Trade Balance and Pending Home Sales data for August. European Central Bank President Christine Lagarde and FOMC Chairman Jerome Powell will also be delivering speeches.
Although Wall Street's main indexes opened decisively higher on Tuesday, they ended up closing the day little changed. The data from the US showed that consumer confidence continued to strengthen in September, helping the dollar find demand. In a report published on Tuesday, Reuters said that Chinese banks were planning to reintroduce the counter-cyclical factor in yuan mid-point fixing to limit the currency's depreciation. Despite this development, the People’s Bank of China (PBOC) set the yuan (CNY) at 7.1107 vs. the previous fix of 7.0722. Hence, the yuan has weakened to a record low against the US dollar following another weaker-than-expected fix.
Meanwhile, European Commission chief Ursula von der Leyen said late Tuesday the damage to Nord Stream pipelines was caused by sabotage and warned of the "strongest possible response" should active European energy infrastructure suffer more attacks.
EUR/USD turned south early Wednesday and was last seen trading at its weakest level in over two decades at around 0.9550. Earlier in the day, the data from Germany showed that the Gfk Consumer Confidence Index dropped to a new record low of -42.5 for October, highlighting the deteriorating sentiment due to rising energy prices.
GBP/USD managed to register modest gains on Tuesday but lost its recovery momentum on Wednesday. In a report published on Tuesday, the International Monetary Fund (IMF) voiced its criticism of the UK's mini-budget. "Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture," the IMF said. In the meantime, Bank of England (BOE) Chief Economist Huw Pill noted on Tuesday that they will not sell gilts into a dysfunctional market. "Hard not to draw the conclusion that we will need significant monetary policy response," Pill added. At the time of press, GBP/USD was down 0.7% on the day at 1.0655.
Despite the broad-based dollar strength, USD/JPY continues to fluctuate below 115.00. The risk-averse market environment helps the JPY stay resilient against its rivals and investors might be refraining from selling the currency following last week's unexpected intervention.
Despite having close modestly higher on Tuesday, gold came under renewed bearish pressure on Wednesday and fell toward $1,620. The benchmark 10-year US Treasury bond yield is up 1.5% on the day at 4%, weighing on XAU/USD.
Bitcoin failed to hold above $20,000 and reversed its direction late Tuesday. BTC/USD was last seen losing 2% on the day at $18,700. Similarly, Ethereum is losing over 3% on the day and trading below $1,300.
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