What to watch for on Wednesday, June 8:
Risk aversion was again the main theme, although the dollar fell against its main rivals in the last session of the day. Lower US Treasury yields undermined demand for the greenback as the 10-year note yields 2.97%, after hitting a high of 3.06% earlier in the day.
The World Bank lowered the global GDP forecast for this year to 2.9% from 4.1%. World Bank President David Malpass warned that faster-than-expected tightening could push some countries into a debt crisis similar to that of the 1980s. Malpass added that new energy and food production is essential for Europe and the world, as it would help reduce prices and inflation expectations.
The EUR/USD pair rallied from a fresh weekly low of 1.0651 to end the day a few pips above 1.0700. The GBP/USD pair suffered an early setback and bottomed at 1.2429, but then recovered to end the day near 1.2590.
US Treasury Secretary Janet Yellen testified on the FY2023 budget before the Senate Finance Committee. She stated that the US economy is facing challenges from “unacceptable levels of inflation” as well as headwinds from supply chain issues. An adequate budget is needed to complement the Fed’s actions to tame inflation without hurting the labor market.
Wall Street managed to reverse its negative tone and posted gains in late trading hours, mostly helping commodity-linked currencies. The AUD/USD pair is currently at the 0.7230 price zone, while the USD/CAD is trading around 1.2520, holding at its lowest level in seven weeks.
The USD/JPY pair continued to advance and reached a new multi-year high at 133.99 to end the day at 132.55. USD/CHF posted modest intraday gains to trade around 0.9722.
Weakening US government bond yields boosted XAU/USD. The shiny metal is trading at $1,855 a troy ounce. Crude prices, meanwhile, benefited from the positive tone on Wall Street, with WTI at $120.20 a barrel.
Market volatility reflects uncertainty about the economic future amid fears that aggressive quantitative tightening will trigger recessions among major economies.
Source: Fx Street
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