The risk on tone continued on Wednesday as assets recovered from days of losing. The dollar remained neutral ahead of PPI data and FOMC meeting minutes. The BoE bond-buying scheme helped lift sentiment although recession risks weigh as UK GDP data unexpectedly drops. Commodity pairs such as Australia and New Zealand remained under selling pressure as IMF cuts the global growth forecast for 2023.
GBPNZD rallied by +0.55% as BoE lifts sentiment. The Bond-buying scheme is scheduled to end on Friday while the BoE despite mixed signals intervened on the weaker Pound. The UK economy continues to battle recession risks as economic activity dropped in August. The UK GDP YoY dropped to 2.00% from a previous reading at 4.4%, while Manufacturing output plunged to -1.6 % against +0.2% surveyed. The pair bounced off a 1.9600 psychological level and bulls may target the 1.9900 level, a 5-day high. A break above that level could strengthen the bullish outlook towards the 2.0050 level, a 9-months high.
USDJPY soared by +0.37% to a fresh 24-year high ahead of the FOMC meeting minutes. The Dollar rose amid the expectation of aggressive rate hikes in the near term and the Fed-BoJ policy divergence continues to weigh on the JPY. However, US Inflation data to be released on Thursday remains a key event of the week after FOMC meeting minutes, which Traders should pay close attention to. The pair broke above the 145.80 resistance and bulls are capped by the 147.00 psychological level.
EURCAD remained steady at -0.02% ahead of ECB president Lagarde’s speech. The Euro Industrial Production MoM (August) rose to 1.5% vs the 0.6% expected, while the German 10-year bund Auction surged to 2.330% from a previous reading at 1.870%. The Canadian dollar maintain strength as a recovery in oil prices helped sustain neutrality. The pair is currently sitting above the 1.3350 level and upside gains are capped by the 1.3570 level.
European stocks wobbled as UK’s unexpected drop in economic outlook triggered recession risks. FTSE100 maintained steadiness at +0.06% at the 6850-support level and gains are capped by the 6900 level. DAX advanced by +0.22% as a rebound in energy prices helped lift sentiment. Critical levels to watch are the 12100 support and 12400 resistance level. CAC40 edged higher by +0.10% as bulls find near-term support at the 5775 level and a break above the 6000 level could confirm a bullish outlook.
US stock futures rose as investors focus on inflation data and Fed meeting minutes. S&P500 futures rose by +0.29% as bulls defended the 3600 support and the price could retrace towards a 3800-resistance level. However, a break below the 3600 could target the 3500 level. Nasdaq100 futures rallied by +0.41% as the 10750-support level continues to hold. Bulls are challenged by the 11000 figure, a previous support-turned-resistance. DJIA index futures edged higher by +0.20% ahead of US PPI data. Critical levels to watch out for are the 29000 support and 30000 near-term resistance.
Gold struggled to hold on to gains as the dollar strength retreated ahead of the FOMC meeting minutes. The yellow metal rose by +0.16% after finding temporary support at the 1661 level and upside gains are capped by the 1680 level. A break below the 1661 level could trigger selling pressure towards the 1620 and 1600 levels.