Dollar extends decline alongside yields, eyes on key data from US and EU

Here’s what you need to know on Wednesday, March 30:

Renewed optimism for a diplomatic solution to the Russian-Ukrainian conflict allowed risk flows to dominate financial markets on Tuesday and caused the greenback to lose interest. The dollar remains on its feet on Wednesday morning as attention turns to ADP data on the fourth quarter employment and GDP trend in the United States. The European dossier will also include the German inflation report and the Eurozone sentiment figures. In addition, investors will closely monitor geopolitical developments.

March US ADP Employment Snapshot: Private job creation slows as yield curve flattens.

Following Tuesday’s talks, Russia’s Defense Ministry announced it would reduce military activities around Kyiv and Chernihiv. Moreover, one of the negotiators for Ukraine noted that they had made enough progress to arrange a meeting between Ukrainian President Volodymyr Zelenskyy and his Russian counterpart Vladimir Putin.

Although the Pentagon said early Wednesday that Russia was moving troops around kyiv instead of withdrawing them, market action does not yet indicate an apparent negative change in sentiment, with US stock index futures trading flat that day. The US dollar index, which lost 0.7% on Tuesday, is already down 0.3% near 98.00 and the yield on US 10-year Treasuries is down 1.3% to 2.37 %. Along the same lines, British military intelligence argued that Russian forces were returning to Belarus to reorganize and resupply.

During Asian trading hours, USD/JPY fell sharply towards 121.00. In response, the Bank of Japan (BOJ) announced that it had conducted an emergency market operation by offering to buy 100 billion yen worth of 10-25 year Japanese government bonds, but the pair failed to stage a convincing recovery. Commenting on the latest market moves, BOJ Governor Kuroda noted that the cost of buying US dollars to purchase commodities was a major factor behind the recent weakness in the yen.

EUR/USD hit its highest level in more than ten days at 1.1137 on Tuesday and ended a four-day losing streak. The pair is holding on to modest daily gains above 1.1100 early Wednesday.

GBP/USD climbed above 1.3150 during European trading hours on Tuesday, but erased daily gains to close flat near 1.3100. At the time of writing, the pair was trading in positive territory near 1.3120.

Gold plunged to its lowest level since late February at $1,890 on Tuesday. As US Treasuries yields headed south, XAU/USD reversed direction during the US session and continued higher early Wednesday. The pair was last seen posting modest daily gains above $1,920.

Despite the improving market sentiment, Bitcoin lost bullish momentum on Tuesday and posted small daily losses. BTC/USD is trading near $47,500 so far in the day. Ethereum hit its highest level since early January at $3,483 on Tuesday before entering a consolidation phase near $3,400 early Wednesday.

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