Dollar takes a breather before final US GDP, Powell testimony and end-of-quarter flows

This is what you need to know to trade today Thursday, September 30:

The dollar is retreating after rebounding on Wednesday amid rising yields related to the prospect of reduced Fed bond purchases. Fed Chairman Jerome Powell faces cameras for a third day consecutive after reiterating its position that inflation should decline. Congress is still grappling with the debt ceiling after moving to avoid a lockdown. The focus is on the figures for US GDP and German inflation.

King Dollar: The US dollar rose on Wednesday, sending the EUR/USD below 1.16, the lowest level since November last year, and at the GBP/USD towards 1.34. Elevated yields from Treasury yields, a belated reaction to the signal of a reduction from the Federal Reserve last week, is the dollar’s main driver. Early on Thursday, the USD is returning some ground.

The oro it extended its slide, hitting a six-week low at $ 1,721 on Tuesday in response to higher US yields. The bounce in XAU / USD has been more significant than in currencies.

Equities are on their way to another earnings day on Thursday after stabilizing on Wednesday. The relative calm in the stock markets comes despite several global concerns, which show that the strength of the dollar is linked to the reduction in bond purchases.

See: Why only a fall in the markets could stop the rise of the dollar, contrary to normal behavior

The chairman of the Fed, Jerome Powell, testifies on Thursday before a House Committee and will likely repeat his messages from the past few days. Speaking with the heads of the central banks of the eurozone, the UK and Japan, Powell said he expects supply bottlenecks to ease. The Fed remains on track to announce a reduction in bond purchases in November.

American politicsSenate Majority Leader Chuck Schumer said lawmakers agreed to extend government funding through Dec. 3, avoiding an imminent shutdown. On the other hand, the United States is still on track to reach the debt ceiling in mid-October. President Joe Biden’s proposed $ 3.5 trillion spending plan is up in the air amid infighting in his Democratic Party.

Second quarter US gross domestic product will be confirmed at 6.6% annualized on final reading. The economic calendar points to a moderate decline in weekly jobless claims.

Germany publishes its first inflation estimates for September after Spain surprised by reporting an annual level of 4%. Coalition talks in Europe’s largest economy have started after the center-left SPD rose to the top in Sunday’s elections.

The UK continues to fight gas station shortages and also with the end of its paid leave scheme. The government supports fewer workers than before in the pandemic, but uncertainty remains about the impact on unemployment.

China it continues to grapple with power outages in the Northeast, and authorities have moved to ration electricity and coal consumption. Concerns about additional supply chain disruptions weighed on sentiment earlier this week. China’s official PMI manufacturing purchasing managers index fell below 50 in September, reflecting a contraction.

On the other hand, the service sector surveys remained optimistic. Bloomberg reported that Evergrande has resumed construction on several projects, implying that the indebted construction giant continues to operate.

cryptocurrencies: Better market mood appears to have pushed digital assets higher. Bitcoin is moving above $ 43,000, Ethereum is above $ 3,000, while ADA remains above $ 2.10.

Monetary flows: The turbulent third quarter is coming to an end, which involves last minute adjustments from portfolio managers. Some of the more recent gains in the dollar could be reversed.