Here is what you need to know on Thursday, September 29:
The US Dollar Index (DXY) lost over 1% on Wednesday, the 10-year US Treasury bond yield fell 5.5% and Wall Street's main indexes gained between 1.9% and 2%. The market correction, however, seems to be over already with the DXY rising above the mid-113.00s and the US stock index futures trading deep in negative territory. Business and consumer sentiment data from the euro area and HICP figures from Germany will be looked upon for fresh impetus during the European session. In the second half of the day, the US Bureau of Economic Analysis will release the final reading of the annualized Gross Domestic Product growth for the second quarter.
During the Asian trading hours, Reuters reported that China's finance ministry was planning to issue about 2.5 trillion yuan ($347.4 billion) in government bonds in the fourth quarter. This headline helped the Shanghai Composite Index limit its daily losses on Thursday but markets remain risk-averse early Thursday.
EUR/USD gained more than 100 pips on Wednesday but already retraced a large portion of the previous day's rally. Several European Central Bank (ECB) policymakers noted that 75 basis points hikes in rates would be appropriate in October. Nevertheless, the souring market mood and the renewed dollar strength don't allow the pair to shake off the bearish pressure. As of writing, EUR/USD was down 0.9% on the day at 0.9645.
Following the Bank of England's (BoE) intervention in the gilt market, GBP/USD fluctuated wildly and ended up closing the day in positive territory above 1.0800. The BoE said that it would carry out temporary purchases of long-dated UK government bonds to restore orderly market conditions. The UK central bank, however, noted that the MPC's annual target of £80 billion stock reduction will remain unaffected. Meanwhile, several news outlets reported that the UK government had no plans of reversing its fiscal policy and that Finance Minister Kawsi Kwarteng would not resign. When asked about the market reaction to the mini-budget early Thursday, British Prime Minister Liz Truss said that she believed that the government had done the right thing. As markets keep a close eye on the latest developments in the UK gilt markets, GBP/USD loses 1% on the day below 1.0800.
With market focus staying on the British pound and bond markets, USD/JPY registered small daily losses on Wednesday. Supported by the rebound in US yields, USD/JPY trades in positive territory slightly below 145.00 on Thursday.
Gold capitalized on the sharp decline seen in the US yields on Wednesday and rose nearly 2%, posting its largest one-day gain since March. With the 10-year US yield rising over 3% early Thursday, gold failed to build on Wednesday's gains and was last seen falling 1% on the day at $1,643.
Bitcoin rose nearly 2% on Wednesday but lost its bullish momentum before testing $20,000. At the time of press, BTC/USD was fluctuating in a narrow range above $19,000. Ethereum struggled to make a decisive move in either direction on Wednesday and close the day virtually flat. ETH/USD stays under modest bearish pressure and trades within a touching distance of $1,300.
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