What you need to take care of on Thursday, September 29:

The dollar stretched its rally throughout the first half of the day but changed course dramatically after Wall Street’s opening. US government bond yields plummeted with that on the 10-year note, down roughly 20 bps, taking its toll on the American currency. The Dollar Index hit a record high of 114.78, later retreating towards the 112.60 price zone.

 Several US Federal Reserve officials were on the wires, repeating the well-known message of another 75 bps coming up next, aiming for a top to Fed funds rate between 4.25% and 4.75% in the first quarter of 2023.

The EUR/USD pair plummeted to a 22-year low of 0.9535, extending later its intraday recovery to 0.9750, trading a handful of pips below the latter at the end of the day. The EU energy crisis maintains local authorities on their toes, and the EU Commission released a paper assessing gas price measures.

Also, ECB President Christine Lagarde participated in a US-European GeoEconomics forum and said they would continue to hike rates in the next several meetings. Additionally, Governing Council member Peter Kazimir and Bank of Latvia Governor, and ECB governing council member, Martins Kazaks were on the wires supporting a 75 bps rate hike in the October meeting.

The GBP/USD pair was quite volatile amid back and forth from the Bank of England. It managed to settle at around 1.0880 amid the broad greenback’s weakness.  The BOE decided to buy long-dated UK government bonds starting today to restore market conditions. It later confirmed that it could buy just £1.025 billion in the emergency QE operation, well below the planned £5 billion. Long-term yields plummeted with the announcement.  The central bank also postponed the first gilt sale operations, supposed to start next week,  to October 31 and proceed after that. The fiscal strategy was strong international criticism.

USD/JPY show little signs of life despite high volatility across the FX board, ending the day marginally lower at 114.10. Commodity-linked currencies beat the greenback, with AUD/USD trading at 0.6515 and USD/CAD at 1.3635. The USD/CHF pair also edged firmly lower, now hovering at around 0.9765.

Gold prices soared, and XAUUSD trades at $1,660 a troy ounce, its highest for the week. Crude oil prices recovered, and WTI settled at $82.00 a barrel.

Technically, the sharp downturns in major pairs seem corrective amid the last dollar’s overbought conditions. However, the rallies need to continue in the upcoming session to confirm interim bottoms.

On Thursday, the focus will be on German inflation, expected to have raised by 9.4% YoY in September.

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