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Markets were generally optimistic for a second consecutive day, leading to a continued dollar selloff after five-day loss streak while other financial assets were not shy to immediately benefit from the softer American dollar.
Government bonds kept recovering ground, keeping yields under pressure, which weighed on the US dollar. The EUR/USD pair trades just near parity and at its highest in over two weeks. GBP/USD is also up, currently trading in the 1.1470 price zone.
The Swiss Franc edged higher against the US dollar, with USD/CHF now trading at around 0.9790, while USD/JPY kept consolidating, now trading at around 144.00.
Gold benefited from the broad US dollar weakness, trading at around $1,725 a troy ounce. Crude oil prices were also up, with WTI now changing hands at $86.20 a barrel ahead of OPEC+ meeting on Wednesday.
Economic Data
Global worries concerning risk of a recession are still the same and inflation is still stubborn across most major economies. For the record, the EU published the August Producer Price Index, which soared by 43.3% YoY, a record high.
The number of job openings decreased to 10.1 million on the last business day of August, the US Bureau of Labor Statistics (BLS) reported in its Job Openings and Labor Turnover Summary (JOLTS) on Tuesday. This print came in slightly lower than the market expectation of 10.4 million.
Other Developments
The catalyst, on Tuesday, was the Reserve Bank of Australia, as it came out with a dovish surprise move. RBA’s policymakers hiked the cash rate by a modest 25 bps, below the 50 bps expected, being the first important central bank to break the ultra-aggressive quantitative tightening.
The decision fueled hopes central banks are approaching the end of aggressive cycle of tightening. Global stocks rallied on relief, with US indexes were seen sharply up for a second consecutive day as major indexes added over 2% each.
The Australian dollar was the worst performer after RBA’s monetary policy decision, with AUD/USD now hovering at around 0.6500. The USD/CAD plunged towards 1.3500, trading nearby at the end of the American session.
Market players now await the Reserve Bank of New Zealand monetary policy decision. The central bank is expected to hike the main rate by 50 bps to 3.5%, and any decision different to that could trigger further volatility.
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