Dollar strength reflected a spike in the US 10-year Treasury yield, which reached a three-month high of 1.563%. During the North American session, negativity came from a decline in equity indices amid comments about Jerome Powell and the prospect of a US default.
Senator Elizabeth Warren told the Fed Chairman that she would oppose his nomination to a second term, criticizing his financial regulatory record and calling him a "dangerous man."
Jerome Powell and Janet Yellen both testified before Congress that a US default over a failure to raise the debt ceiling would be disastrous. Yellen served notice that the government could run out of cash by October 18.
A decline in EURGBP was capped by a sharp rise in this pair, with euro surging 1.34% to 0.8641 against sterling amid a plunge in UK bonds. The country’s assets face a double whammy of galloping inflationary expectations alongside a slowdown in growth due to an expected tightening cycle. As a result, the GBPUSD pair sank from 1.3717 to 1.3521.
Today’s macro schedule (GMT 3)
- 12:00 Eurozone: EZ economic sentiment, consumer confidence, and industrial sentiment (September)
- 16:00 Switzerland: SNB quarterly inflation report
- 17:00 US: pending homes sales (August)
- 17:30 US: EIA weekly petroleum status report
- 18:45 Europe: speeches by ECB President Lagarde, BoE Governor Bailey, BoJ Governor Kuroda, and Fed Chair Powell
- 21:00 US: Fed member Raphael Bostic
Current outlook
By the time of writing, major currencies were showing mixed performance. The aussie, sterling and loonie were trading in positive territory. Other currencies are also attempting to head north. The reason for improved risk sentiment was news from China.
Chinese developer Evergrande announced that it will be selling off a $1.5 bln stake in Shengjing Bank. The developer's shares soared 11% to HKD 2.90 on the Hong Kong Stock Exchange.
Investors are fixated on the fixed-income market (bonds), the fuel and energy crisis in the UK and Europe, real estate developer Evergrande, the US debt ceiling, and the Delta strain of the coronavirus. In addition to these factors, traders will focus today on speeches by the heads of central banks.
Technical analysis
S&P 500 index futures are trading in positive territory. Buyers are attempting to muster an upward correction after a 17-day slump. Yesterday's rally in the cross stalled for EURUSD dollar buyers, as price action remained near 1.1685. Sterling has slipped about 20 pips and if the cross enters a downward correction, the euro risks a leg down to 1.1650. At this point, it is hard to say whether buyers will be able to hold the current level given the confluence of factors currently impacting the market.