Midday brief – Unsolved Debt Ceiling Crisis Sparked Risk Aversion Among Investors

On the debt ceiling update, a consensus was not reached although the meeting brought optimism to the dollar following remarks by the White House that the talks were productive and direct. Following the meeting, Kevin McCarthy commented that the Democrats and the Republicans’ sides were still far from meeting. Traders await housing data from the US.

USDJPY extended its 3-day rise by +0.35% amid a risk-off mood in European trade. The unsolved debt limit problem in the US has prompted investors to seek the safe haven dollar, abandoning the Japanese Yen despite pleasing first-quarter growth data.

The Japanese Gross Domestic Product rose 1.6% on a yearly basis beating estimates of 0.7% while the quarter-on-quarter read came in at 0.4% against 0.1%. Buyers soared towards 138.00 although 137.50 may be a hurdle on the rally. A move lower, however, may give sellers 135.50.

EURUSD held lower ground as the greenback firmed up on Wednesday amid a risk-off mood. The US dollar also rode on hawkish Fed speak where Fed officials anticipate another rate hike before pausing the tightening cycle. Elsewhere in the Euro area, headline inflation rose by 0.1% to 7.0% as expected while month-on-month inflation dropped to 0.6% from an expectation of 0.7%.

The figures were without much help to the local currency. Looking ahead, data from the US will include building permits, Housing Starts, and crude oil inventories. The pair gave up -0.33% trading below 1.0850 as bears may slide to 1.07050.

AUDNZD drifted lower by -0.35% after the Australian Bureau of Statistics showed that wages remained unchanged at 0.8% in the first quarter ahead of the Australian employment data, leaving room for the RBA to maintain its rate hike pause stance. Also weighing on the risk-sensitive Aussie was the tepid risk tone on the day.

The New Zealand dollar appreciated ahead of the country’s annual budget release due Thursday. The pair continues to slide heading for the 1.0600 psychological mark.

European equities traded in a sluggish manner amid risk-off appetite. The UK 100 gained +0.17% caught between 7800 and 7720. CAC 40 went up by +0.25% as traders struggled to keep away from the 7400 mark. DAX ticked up by +0.41% as bulls challenged the 16 000 mark for further upside traction.

US stock futures as investors await more talks on the US debt ceiling. The US 100 futures were up +0.08% rising towards 13 600. US 30 futures gained +0.32% as buyers may reclaim 33200 on the rise. US 500 futures rose +0.26% back in the 4140-4120 range.

BTCUSD fell -1.09% from the $27 200 intraday high as the dollar strengthened on the day. Sellers may face a hurdle at $ 26 000 before revisiting $ 25 400 in the near term.