Forex Today: The dollar recovers its strength after a brief correction

This is what you need to know to trade today Wednesday September 28:

The dollar regained its strength late in the American session on Tuesday and stretched higher during Asian trading hours on Wednesday, with the Dollar Index touching new multi-decade high at 114.70. The risk-averse environment in the markets, amid rising geopolitical tensions and fears of a global economic slowdown, helped the dollar outperform its rivals in midweek. In the second half of the day, the US economic calendar will include data on the merchandise trade balance and pending home sales for August. Speeches will also be made by European Central Bank President Christine Lagarde and FOMC Chairman Jerome Powell.

Although Wall Street’s main indices opened strongly higher on Tuesday, they ended the day little changed. US data showed consumer confidence continued to strengthen in September, helping the dollar find demand. In a report released on Tuesday, Reuters said Chinese banks were planning to reintroduce the countercyclical factor in fixing the yuan’s midpoint to limit currency depreciation. Despite this, the People’s Bank of China (PBoC) pegged the yuan (CNY) at 7.1107 from the previous peg of 7.0722. Therefore, the yuan has weakened to a record low against the US dollar after another weaker-than-expected fix.

Meanwhile, the head of the European Commission, Ursula von der Leyen, declared late on Tuesday that the damage to the Nord Stream gas pipelines was caused by sabotage and warned of the “strongest possible response” in the event that the active European energy infrastructures suffer more attacks.

The pair EUR/USD drifted south early on Wednesday, reaching its weakest level in more than two decades, around 0.9550. Earlier in the day, data out of Germany showed the Gfk Consumer Confidence Index fell to a new record low of -42.5 in October, highlighting deteriorating sentiment due to rising energy prices.

The GBP/USD managed to post modest gains on Tuesday but lost its recovery momentum on Wednesday. In a report released on Tuesday, the International Monetary Fund (IMF) voiced its criticism of the UK mini-budget: “Given elevated inflationary pressures in many countries, including the UK, we do not recommend large, untargeted fiscal packages at this juncture.” said the IMF. Meanwhile, the Bank of England’s (BoE) Chief Economist, Huw Pill, signaled on Tuesday that they will not sell gilts in a dysfunctional market: “It is hard not to draw the conclusion that we will need a significant monetary policy response,” Pill added. At time of writing, GBP/USD is down 0.7% on the day, trading at 1.0655.

Despite the overall strength of the dollar, the USD/JPY continues to fluctuate below 115.00. The risk-off environment in the markets helps the yen remain resilient against its rivals and investors may be refraining from selling the currency after last week’s unexpected intervention.

Despite closing slightly higher on Tuesday, the Prayed It came under further downward pressure on Wednesday and fell towards $1,620. The 10-year US Treasury bond yield rose 1.5% on the day to 4%, weighing on XAU/USD.

The Bitcoin it failed to hold above $20,000 and reversed direction late on Tuesday. BTC/USD loses 2% on the day to $18,700. In the same way, ethereum is losing more than 3% on the day and is trading below $1,300.