Dollar resumes gains ahead of US growth data
Dollar rose in European trade against a basket of major rivals, after a hiatus from gains yesterday off 20-year highs while US 10-year treasury yields rebound.
Such developments come ahead of US growth data for the second quarter, which will impact pricing for Federal Reserve's rate hikes until March.
The Index
The dollar index rose 0.7% to 113.79, after losing 1.4% yesterday, the first loss in four days, and the largest since March 2020 on profit-taking away form 20-year highs at 114.78.
The dollar also tumbled yesterday on profit-taking while US 10-year treasury yields dipped after Bank of England intervened in the UK bonds market.
US Bonds
US 10-year treasury yields rose 3.5% on Thursday, resuming the gains after a hiatus yesterday away from 14-year highs at 4.019%, in turn boosting the greenback.
The developments come ahead of important US data later today on unemployment claims and GDP growth.
Growth Data
US GDP is expected to have shrunk 0.6% in the second quarter, after falling 1.6% in the first quarter.
If a contraction was confirmed in the second quarter, it'll hurt the bonds market in the short and medium terms, and will bolster gold prices for fresh gains.
Sterling rallies after Bank of England's intervention
Sterling spiked yesterday against dollar away from record lows, marking the best profit in three months after Bank of England's intervention in the UK bonds market, so what did it do and how did the market react?, we explain in this article.
The Pound
Sterling spiked 1.45% yesterday against dollar, the second profit in a row, and the largest since June 16.
The pound hit record lows against dollar at 1.0348 on Monday amid concerns about a potential sovereign debt crisis in the UK.
Bank of England
Bank of England started its emergency bonds purchases program on Wednesday valued at a billion pounds and asserted its commitment to purchase as many long-term golden bonds as needed until October 14.
Such immediate intervention tanked long-term treasury yields in the UK, and also tanked US 10-year treasury yields, in turn boosting the pound against dollar.
The BoE also said it's ready to purchase over 20-year traditional bonds in secondary markets with rates that might reach 5 billion pounds initially for each auction.
The bank embarked on emergency purchases of long-term government bonds this week to rebalance the chaotic markets.
UK Bonds
UK 10-year treasury yields tumbled by 10.50% on Wednesday, the heaviest loss since March away from 10-year highs at 4.582%.
So far UK 10-year treasury yields remain 139 point higher than early September levels, on track for the largest monthly increase on record.
Gold dips once more ahead of US growth data
Gold prices declined by over 1% in European trade on Thursday after marking the biggest profit in six months yesterday, with today's decline resulting from a new surge in US treasury yields ahead of US growth data.
If a recession was confirmed in the second quarter, it'll raise risks and pressures even more on the Federal Reserve as it seeks to tighten monetary policies to contain record inflation.
Prices Today
Gold prices fell 1.1% to $1,641.50 an ounce, after rising 1.9% yesterday, the largest profit since March, away from 29-month lows at $1,614.
US Yields
US 10-year treasury yields rose 3.5% on Thursday after a tumble yesterday off 14-year highs at 4.019%, in turn pressuring non-yielding gold futures.
The gains come ahead of major US data later today on unemployment claims and GDP growth.
If a contraction was confirmed in the second quarter, it'll hurt the bonds market in the short and medium terms, and will bolster gold prices for fresh gains.
US GDP is expected to have shrunk 0.6% in the second quarter, after falling 1.6% in the first quarter.
The SPDR
Gold holdings at the SPDR Gold Trust remained flat yesterday at 940.86 tones, the lowest since March 2020.
