Here is what you need to know on Wednesday, January 5:
The greenback gathered strength against its rivals during the first half of the day on Tuesday but lost its momentum in the late American session. The risk-averse market environment caused US Treasury bond yields to retreat and the US Dollar Index pulled away from the two-week high it set earlier in the day. Later in the day, the US private sector employment report published by the ADP and the FOMC's minutes of the December policy meeting will be watched closely by market participants. The IHS Markit will release the final revisions to Services and Composite PMI data for the euro area, Germany and the US as well.
Reflecting the souring marked mood, the Shanghai Composite Index is losing 1% and US stocks futures are down between 0.3% and 0.55%. Ongoing concerns surrounding the Chinese real estate giant Evergrande, inflation fears and the rapid spread of the coronavirus Omicron variant force risk rallies to remain limited.
Meanwhile, the data from the US showed on Tuesday that the business activity in the manufacturing sector expanded at a softer pace than expected in December. On a positive note, the Prices Paid component of the ISM Manufacturing PMI dropped sharply to 68.2 from 82.4 in November.
EUR/USD closed the second straight day in the negative territory on Tuesday but it seems to have settled around 1.1300 in the early European session.
GBP/USD dropped below 1.3500 but managed to regather its bullish momentum. British Prime Minister Boris Johnson said that they have a chance to "ride out this Omicron wave" without imposing lockdowns and helped the pound find demand.
USD/JPY extended its rally to a fresh five-year high above 116.00 on Tuesday. With the benchmark 10-year US Treasury bond yield edging lower early Wednesday, the pair is trading in the negative territory near 116.00.
Gold's inverse correlation with US Treasury bond yields remains intact mid-week. XAU/USD tested $1,800 on Tuesday but ended up closing the day in the positive territory above $1,810.
Bitcoin continues to trade near the lower limit of its one-month-old trading range at $46,000. Ethereum closed little changed on Tuesday and started to edge higher toward $4,000 early Wednesday.
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EUR/USD eases toward 1.0700 as USD finds feet ahead of ADP, Fed Minutes
EUR/USD is retreating toward 1.0700 in the early European session on Wednesday. The pair struggles, as the US Dollar finds its feet in the aftermath of the dovish Fed Chair Powell's comments. Cooling EU inflation keeps the Euro undermined. Eyes turn to US ADP data, Fed Minutes.
GBP/USD flatlines below 1.2700, looks to US data/Fed minutes
GBP/USD is lacking a firm directional bias below 1.2700 on Wednesday, reversing early gains. Traders appear reluctant and prefer to wait on the sidelines ahead of the FOMC minutes while the UK elections on Thursday also keep them on the edge. US ADP data eyed as well.
Gold eyes a range breakout, as Fed Minutes looms
Gold price is trading around a flatline near $2,330 early Wednesday, as traders consider the recent US jobs data and Federal Reserve Chairman Jerome Powell’s speech, bracing for yet another busy US calendar.
Bitcoin struggles around $64,000 level
Bitcoin faces resistance near the $64,000 daily level, leading to a 1.05% decline in trading on Wednesday. Ethereum and Ripple similarly encounter resistance, resulting in 1% and 0.5% declines, respectively.
ADP Employment Change Preview: US private sector expected to add 160K new jobs in June
The United States ADP Research Institute will release its monthly report on private sector job creation for June. The announcement is expected to show that the country’s private sector added 160K new positions in June after adding 152K in May.