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Gold prices soared, and XAUUSD trades at $1,660 per troy ounce, its highest for the week. Crude oil prices recovered, and WTI settled at $82.00 a barrel. The US dollar pushed its rally throughout the first half of the trading day but changed its direction dramatically after Wall Street’s opening.
Treasury yields fell with, the 10-year note, down roughly 20 bps, and consequently impacting the dollar’s performance. The Dollar Index hit a record high of 114.78, later retreating towards the 112.60 mark.
The EUR/USD pair fell to a 22-year low of 0.9535, extending later its intraday recovery to 0.9750, trading a handful of pips below the latter at the end of the day. The EU energy crisis maintains local authorities on their toes, and the EU Commission released a paper assessing gas price measures.
Economic Data
Wednesday’s weekly EIA report was bullish for crude prices. The EIA reported crude inventories unexpectedly fell -215,000 bbl versus expectations of a +2.0 million bbl build. Also, EIA gasoline supplies unexpectedly fell -2.42 million bbl to a 10-month low versus expectations of a +500,000 bbl build.
U.S. pending-home sales fell 2% in August, for the third straight monthly drop, according to the monthly index released Wednesday by the National Association of Realtors (NAR). Analysts’ estimates had forecast the pending home sales index to drop by 1.4%.
Other Developments
Fed officials appeared in news headlines to defend the pace of rate hiking and repeat the well-known message of another 75 bps coming up next, aiming for a top to Fed funds rate between 4.25% and 4.75% in 2023’s Q1.
ECB President Christine Lagarde said policymakers are to continue to hike rates in the next several meetings. Governing Council member Peter Kazimir and Bank of Latvia Governor, and ECB governing council member, Martins Kazaks were on the wires supporting a 75 bps rate hike in the October meeting.
The BOE decided to buy long-dated UK government bonds starting today to restore market conditions. It later confirmed that it could buy just £1.025 billion in the emergency QE operation, well below the planned £5 billion. Long-term yields plummeted with the announcement. The central bank also postponed the first gilt sale operations, supposed to start next week, to October 31 and proceed after that. The fiscal strategy was strong international criticism.
The GBP/USD pair was quite volatile amid back and forth from the Bank of England. It managed to settle at around 1.0880 amid the broad USD’s weakness.
USD/JPY show little signs of life despite high volatility across the FX board, ending the day marginally lower at 114.10. Commodity-linked currencies beat the USD, with AUD/USD trading at 0.6515 and USD/CAD at 1.3635. The USD/CHF pair also edged firmly lower, now hovering at around 0.9765.
On Thursday, the focus will be on German inflation, expected to have raised by 9.4% YoY in September. Traders will also await the US GDP data.
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