On Wednesday, the US Dollar Index (DXY) plummeted by over 1%, the yield on 10-year US Treasury bonds fell by 5.5%, and the major indices on Wall Street rose by 1.9% to 2%. Although US stock index futures are trading in deep negative territory and the DXY has risen beyond the mid-113.00s, the market correction appears to be finished.
During the European session, investors will be looking for new momentum from statistics on business and consumer mood in the euro area, as well as German HICP figures. The US Bureau of Economic Analysis will publish the final estimate of annualized GDP growth for the second quarter of the year in the afternoon.
China’s finance ministry is aiming to offer roughly 2.5 trillion yuan ($347.4 billion) in government bonds in the fourth quarter, according to a Reuters story published during Asian trade hours. Markets remain risk-averse early Thursday despite this headline’s impact on the Shanghai Composite Index’s daily losses.
The EUR/USD pair advanced by more than 100 pips on Wednesday, but it has given back most of those gains today. Several members of the European Central Bank’s (ECB) policymaking council have said that a rate hike of 75 basis points in October is warranted.
However, the pair is unable to escape the bearish pressure due to the deteriorating market sentiment and the increased strength of the dollar. The Euro was trading at 0.9645 to the Dollar, down 0.9% for the day.
The British pound to US dollar exchange rate swung drastically when the Bank of England (BoE) intervened in the gilt market, eventually completing the day with a gain of more than 1.0800. In an effort to restore market stability, the BoE said that it will make short-term purchases of long-dated UK government bonds.
However, the UK’s central bank stressed that the MPC’s yearly aim of £80 billion stock reduction will continue as planned. Meanwhile, it was stated by multiple sources that Finance Minister Kawsi Kwarteng would not resign and that the UK government had no intentions to change its economic strategy.
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Thursday morning, British Prime Minister Liz Truss was asked about the market reaction to the government’s mini-budget, and she said she was confident that the government had made the correct decision. While investors watch developments in the UK gilt markets, the GBP/USD exchange rate falls below 1.0800, down 1% on the day.
Weakness in the US dollar relative to the Japanese yen was recorded for a second day on Wednesday as investors continued to focus on the British pound and bond markets. On Thursday, the US Dollar/Japanese Yen exchange rate is slightly above 145.00 thanks to the recovery of US yields.
Following the dramatic drop in US yields on Wednesday, gold prices shot up nearly 2%, its highest one-day increase since March. Gold failed to expand on Wednesday’s gains, sliding 1% to $1,643 by day’s end as the 10-year US yield rose beyond 3% early Thursday.
On Wednesday, Bitcoin gained roughly 2%, but the bullish momentum it had before it reached $20,000 quickly evaporated. As of this writing, the Bitcoin/US Dollar exchange rate was moving within a tight range above $19,000.
Indecisive trading on Wednesday kept Ethereum’s price close to unchanged for the day. The Ethereum/U.S. Dollar exchange rate continues to see some bearish pressure and is trading close to $1,300.
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