What to watch for on Wednesday, August 3:
Risk aversion once again benefited the dollar. The tensions arose when the visit of the president of the US House of Representatives, Nancy Pelosi, to Taiwan became known. Pelosi supports the local government against the will of China, which has fueled geopolitical tensions between the two major economies.
USD demand temporarily dipped earlier in the American session but picked up again following comments from US Federal Reserve officials. Chicago Fed’s Charles Evans noted that inflationary pressures may be amplifying. and that the unemployment rate could rise to around 4.25%, but he considered a 50 basis point rate hike in September reasonable. Loretta Mester, for her part, said she doesn’t think the country is in a recession, adding that the job market is in great shape. On inflation, however, she noted that it has not decreased “at all.”
The EUR/USD pair fell to 1.0170, settling a few pips above the latter. The GBP/USD pair also settled in the red after a failed attempt to recover the 1.2200 threshold.
The dollar also appreciated against its safe-haven rivals. USD/CHF is trading around 0.9560, while USD/JPY is currently around 132.80. Gold hit an almost one-month high of $1,787.99 and ended the day slightly down around $1,768.
Oil, meanwhile, recovered some ground and a barrel of WTI is currently at $94.30.
US Treasury yields rose. The 10-year Treasury yield currently stands at 2.573%, while the 2-year Treasury yield jumped to 3.07%. The yield curve is now the most inverted since 2000.
Lastly, commodity-linked currencies weakened against the dollar in the American session amid a sour tone from Wall Street. AUD/USD is trading near a relevant low of 0.6911, while USD/CAD is hovering around 1.2850.
Source: Fx Street
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