Mood sours ahead of German inflation data, Fedspeak

Market participants have turned cautious mid-week amid growing concerns over the US debt-limit bill facing resistance at both chambers of Congress after the House Rules Committee advanced it by a slim 7-6 margin on Tuesday. The US Dollar (USD) benefits from risk aversion mid-week ahead of JOLTS Job Openings data for April and Fedspeak. In the European session, Germany’s Destatis will publish inflation data for May.

Reflecting the souring market mood, US stock index futures are down between 0.35% and 0.45%. The US Dollar Index edges higher toward 104.50 following Tuesday slide and the benchmark 10-year US Treasury bond yield is already losing 1% on the day below 3.7%.

During the Asian trading hours, the data from China revealed that the business activity in the manufacturing sector continued to contract at a slightly faster pace in May than in April with the NBS Manufacturing PMI falling to 48.8 from 49.2. In the same period, the Non-Manufacturing PMI declined to 54.5 from 56.4 but came in much higher than the market expectation of 50.7.

AUD/USD came under bearish pressure in the Asian session and the pair was last seen trading at its lowest level since early November below 0.6500. The data published by the Australian Bureau of Statistics revealed on Wednesday that the Consumer Price Index (CPI) rose 6.8% on a yearly basis in April, higher than 6.3% recorded in March. While testifying before the Senate Economics Legislation Committee, Reserve Bank of Australia (RBA) Governor Philip Lowe reiterated that entrenched inflation would lead to higher interest rates and unemployment but these comments failed to help the Aussie find a footing.

EUR/USD rose toward 1.0750 and closed in positive territory on Tuesday. The renewed USD strength, however, weighed on the pair early Wednesday and dragged it back below 1.0700. In Germany, the annual Harmonized Index of Consumer Prices is forecast to rise 6.8%, compared to 7.6% in April.

USD/CAD gathered bullish momentum and advanced to the 1.3650 area early Wednesday. Later in the day, first-quarter Gross Domestic Product (GDP) growth from Canada will be watched closely by market participants.

USD/JPY closed the second straight day in negative territory on Tuesday and continued to stretch lower early Wednesday, pressured by falling US T-bond yields.  The pair was last seen trading slightly above 139.50.

GBP/USD held steady above 1.2400 on Tuesday but lost its traction mid-week. The pair stays on the back foot in the European morning and pushes lower toward 1.2350.

Gold price benefited from retreating US yields on Tuesday and rose toward $1,960. XAU/USD consolidates its recent gains on Wednesday and fluctuates above $1,950.

Bitcoin turned south early Wednesday and fell toward $27,000, losing more than 2% on the day. Ethereum registered marginal gains on Tuesday but reversed its direction on Wednesday. At the time of press, ETH/USD was down more than 1% on the day at $1,870