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Dollar extends decline along with yields, focus on key EU and US data

This is what you need to know to trade today Wednesday March 30:

the renewed optimism for a diplomatic solution to the conflict between Russia and Ukraine on Tuesday allowed risk-on money flows to dominate financial markets and caused the US dollar to lose interest. The dollar remains on the defensive at the start of the European session on Wednesday as the focus shifts to the ADP private sector jobs report and fourth quarter GDP data from the United States. The European calendar brings the German inflation report and eurozone sentiment figures. Additionally, investors will be keeping an eye on geopolitical developments.

See: March ADP Preview: Private Job Creation Slows, Yield Curve Flattens

After Tuesday’s talks, the Russian Defense Ministry announced that it will reduce military activity around kyiv and Chernihiv. In addition, one of Ukraine’s negotiators noted that enough progress had been made to hold a meeting between Ukrainian President Volodymyr Zelenskyy and his Russian counterpart Vladimir Putin.

Even though the Pentagon has said earlier Wednesday that Russia was moving troops around kyiv rather than withdrawing them, market action is yet to point to an apparent negative change in sentiment, with US stock index futures trading flat on the day. The DXY US dollar index, which lost 0.7% on Tuesday, is already down 0.3% near 98.00 on Wednesday, while the 10-year US Treasury yield is shedding 1.3% on the day, trading at 2.37%. In a similar vein, British military intelligence argued that Russian forces were returning to Belarus to reorganize and resupply.

During the Asian session, the USD/JPY fell sharply towards 121.00. In response, the Bank of Japan (BoJ) has announced that it has conducted a emergency market operation by offering to buy 10-25 year Japanese government bonds, but the pair failed to stage a convincing rally. Commenting on the latest market moves, BoJ Governor Kuroda has pointed out that the cost of buying US dollars to buy commodities was one of the main factors behind the recent JPY weakness.

The EUR/USD reached its highest level in more than ten days at 1.1137 on Tuesday and snapped a four-day losing streak. The pair is holding on to modest daily gains above 1.1100 early on Wednesday.

The GBP/USD rose above 1.3150 during the European session on Tuesday, but gave back daily gains to close flat near 1.3100. At time of writing, the pair is trading in positive territory near 1.3120.

The gold plunged to its lowest level since late February at $1,890 on Tuesday. With US Treasury yields turning lower, XAU/USD changed direction during the American session and continued to rise early on Wednesday. At the time of writing, the price of gold is posting modest daily gains above $1,920.

Despite the improving market sentiment, the Bitcoin lost its bullish momentum on Tuesday and posted small daily losses. BTC/USD is trading flat near $47,500 so far today. The ethereum advanced to its highest level since early January to $3,483 on Tuesday before entering a consolidation phase near $3,400 early Wednesday.

Source: Fx Street

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