Dollar resumes gains amid risk aversion, congressional drama, two US data points in sight

Here’s what you need to know on Friday, October 1:

Markets kick back in the last quarter of 2021 as soaring energy costs, fears of a Fed cut and U.S. political wrangling weigh on sentiment. The greenback is gaining ground against all assets despite falling yields. US Core PCE and ISM Manufacturing PMI are closely watched.

Without risk: September was the worst month for US stock markets since March 2020, and October also started with red on screens. The announcement of the Federal Reserve’s upcoming phasing-out moved away from the driver’s seat to determine sentiment. Nevertheless, the dollar remains long on safe haven flows.

Energy crisis: Chinese authorities seek to accumulate natural gas “at all costs” and according to reports, say blackouts are not to be tolerated. The news comes on top of already rising costs in Asia and also in Europe before the cold weather hit for good. Higher costs could derail the recovery even if outages are avoided.

Congress: Democrats have delayed voting on a bipartisan infrastructure bill in response to objections from the Progressive wing, who want guarantees on the bigger spending bill. House Speaker Nancy Pelosi hopes to pass economic legislation on Friday.

U.S. lawmakers quickly passed a law funding the government until December 3, preventing a government shutdown. However, they have yet to raise the debt ceiling, leaving a low possibility of default in mid-October.

EUR / USD is trading well below 1.16, the lowest since November 2020. Eurozone inflation figures are expected to show an increase in the annual consumer price index from 3% to 3.3%. German and Spanish figures exceeded estimates. The indices of final manufacturing purchasing managers are also observed.

GBP / USD Trading around 1.3450, from 2021 lows but under pressure. Britain continues to struggle with gas station shortages. The final manufacturing PMI is also interesting.

Gold is trading around $ 1,750, hanging on to gains made on Thursday. The precious metal remains dependent on returns.

Basic personal consumption expenses, the Federal Reserve’s preferred inflation indicator, is expected to moderate in August after hitting 3.6% year-on-year in June and July. Fed Chairman Jerome Powell has said he expects inflationary pressures to ease in the first half of 2022.

See US Core PCE Preview: Only a sharp drop in the Fed’s preferred gauge could dethrone King Dollar

USD / CAD is trading around 1.27, up as oil prices lag behind natural gas costs and ahead of Canada’s release of monthly growth figures for July. A small contraction is to be expected after the country announced a 0.7% growth rate in June.

Crypto-currencies are mixed on Friday, with Bitcoin trading around $ 44,000, Ethereum just above $ 3,000 and Ada at around $ 2.10.

The ISM Manufacturing PMI is released later today and serves as the first clue to next week’s all-important non-farm payroll. The indicator should show robust growth but persistent inflationary pressures.

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