Forex Today: Dollar retreats amid improving market mood

Here is what you need to know on Tuesday, September 27:

The positive shift witnessed in risk sentiment makes it difficult for the greenback to continue to outperform its rivals early Tuesday and the US Dollar Index retreats toward 113.00 following Monday's volatile action. US stock index futures are up more than 1% in the early European session and the 10-year US Treasury bond yield is down 2% on the day. August Durable Goods Orders and New Home Sales will be featured in the US economic docket later in the day. The Conference Board's September Consumer Confidence data will also be looked upon for fresh impetus.

US Consumer Confidence Preview: Near-term relief or more risk aversion?

During the Asian trading hours on Tuesday, Reuters reported that some of China's big fund managers and brokers were asked to help stabilize the stock market. The Shanghai Composite Index gained more than 1% on the day following this development. On a negative note, Russian Security Council’s Deputy Chairman Medvedev said that they had the right to use nuclear weapons if necessary and noted that they were not bluffing. Despite this comment, however, the Euro Stoxx 600 and Germany's DAX 30 indexes both gain around 1.2% in the early European morning.

After having lost more than 50 pips on Monday, EUR/USD trades in positive territory above 0.9650 early Tuesday. European Central Bank (ECB) Chief Economist Philip Lane said that the sizeable rate increases should make it clear to businesses and workers that demand conditions will be less favourable. Later in the session, ECB President Christine Lagarde will speak on financial stability challenges related to the digitalisation of financial services at an event organized by the Bank of France.

GBP/USD managed to erase the large losses it suffered at the beginning of the week and closed little changed below 1.0800 on Monday. In response to the British pound's significant depreciation, the Bank of England said that they are monitoring developments in financial markets very closely.  "As the MPC has made clear, it will make a full assessment at its next scheduled meeting of the impact on demand and inflation from the government’s announcements and the fall in sterling," the BoE stated. Although these comments had no significant impact on the GBP's valuation, GBP/USD manages to trade in positive territory above 1.0800 on Tuesday.

USD/JPY gained nearly 100 pips amid rising US T-bond yields on Monday but struggled to preserve its bullish momentum. As of writing, the pair was fluctuating in a narrow range above 144.00.

Gold is taking advantage of retreating US yields and gains nearly 1% on the day near $1,640. 

Bitcoin rose more than 2% on Monday and gathered further bullish momentum on Tuesday. At the time of press, BTC/USD was up 5% on the day at $20,200. Ethereum rises toward $1,400 and is up 3.5% on a daily basis.