ZEW index and Fed officials' speeches in focus

On Tuesday, the DXY experienced exhaustion in its uptrend after the index reached its 20-year high at 104.20. Treasury yields shot up during the last two weeks in response to aggressive Federal Reserve tightening expectations. However, after Atlanta Fed President Raphael Bostic suggested the central bank should not hike rates by 75 basis points at its next meeting, yields took a breather. The 10-year US Treasury yields also slipped to near 3.04%.

Equities and oil

Equities in Asia have been supported by a significant slippage in oil prices. With China continuing to tighten its curbs on Covid-19, oil prices have fallen to the near psychological support of $100.00. 

Equities and risk-sensitive currencies were experiencing a steep selloff since any unexpected increase in inflation numbers on Wednesday would force the Federal Reserve (Fed) to take an extremely aggressive hawkish stance on policy rates in June.

The financial markets also reflect concerns that sanctions imposed on Russian oil imports following its invasion of Ukraine could cause some European countries to suffer economic hardship. The proposal still needs a unanimous vote by EU members this week to pass.

Euro/dollar

Due to the solid Nonfarm Payroll (NFP) report and increasing inflationary pressures, the Fed is more likely than not to speed up a rate hike by 75 basis points (bps) in the next meeting.

EUR/USD is advancing towards 1.0600 on a rebound in positive market sentiment in the Asia trading session. Investors look forward to releasing the Euro ZEW Survey-Economic Sentiment on the euro front, which shows a divergence between optimistic and pessimistic institutional investors. When a release is negative, the shared currency suffers. It is expected that the ZEW survey will print -41, a bit up from the prior print of -43.

Gold

Gold bounced back from the 200-day EMA on Tuesday morning in Asia over the weakening dollar as Investors now await inflation data to be released on Wednesday. Gold Price is yet to show signs of recovery, as the dollar could regain its safe-haven status if risk aversion returns after a disappointing German ZEW survey. ZEW readings that fall sharply could portend an impending recession in Europe.

Events of today

The Fed's policymakers and US President Joe Biden will give speeches closely watched for fresh USD valuations, ultimately impacting gold prices. Additionally, the US Treasury Secretary will testify about the FSR later in the day.