The dollar rose on Wednesday and other safe havens also benefited as stocks dropped in early trade and an unexpectedly strong ADP jobs report nAQN04PUFQ reminded markets of central banks' slow march toward normalization.
If the ADP result foreshadows a strong payrolls report on Friday, then Fed tapering expectations centering on a November announcement will receive a lift.
Weaker-than-forecast euro zone retail sales nL8N2R2231 and a 7.7% drop in German industrial orders nL8N2R210G added to concerns about slowing growth teamed with a 13-year high in inflation nL8N2QX193.
Bloomberg reported that the ECB is studying a new bond-buying plan to operate when the pandemic emergency programme ends Click here nAPN0AUIST.
EUR/USD fell 0.4%, just above support near 1.1500, a break of which could trigger a drop to support by 1.1200 nL1N2R2182.
USD/JPY gave back gains made in Asian trading after widespread risk-off flows favored the haven yen and longer-term Treasury yields also shed early gains, even after the upbeat ADP report.
USD/JPY was flat after falling from a 111.79 high, still shy of September's 112.08 pandemic recovery high, to a 111.20 intraday low on EBS.
Treasury yield curve flattening due to expectations of Fed rate hikes beginning in H2 2022 and 10-day moving average support at 111.17 should suffice as support ahead of Friday's jobs report.
A breakout above 2020/19 highs at 112.23/40 might need the pattern of higher lows in the VIX to end innocuously to allow a risk-on and rates-driven drive toward 2018's 114.55 peak nL1N2R21GD.
Sterling fell 0.34%, in line with the broader sell-off in risk-sensitive pairings and after UK construction PMI missed nL1N2R21UE.
The pound has benefited from the BOE being seen raising rates, perhaps even before year-end, and by at least 50bp by the end of 2022, versus the Fed not priced to begin lifting rates until late 2022 nL1N2R216N.
AUD/USD and NZD/USD fell 0.34% and 0.7%, respectively, the latter despite the RBNZ fulfilling rate hike expectations nL4N2R13LL.
Energy prices, particularly natural gas, came off the boil hard on hopes of increased supplies from Russia and more generally due to risk aversion, but Europe and other regions may still be in for a rough winter on the nat gas front nL8N2R12IY.
Bitcoin and Ethereum were up nearly 7% and 2.3%, with bitcoin at nearly five month highs.
Thursday's main event, beyond the fiscal drama in D.C., will be weekly jobless claims, given initial claims increased three weeks in a row despite falling COVID cases and the end of supplemental jobless benefits in most cases.
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