The dollar is continuing its recovery, extending gains from the previous session as traders reduce their expectations of an emergency rate cut by the Federal Reserve. This shift follows Monday’s sell-off, during which market expectations for US interest rate cuts increased due to recession fears sparked by weak US job data released last Friday. Concurrently, US Treasury yields have increased, with the demand for US bonds as a safe haven decreasing and risk-on sentiment returning to a certain extent. As the mood improves, the dollar could continue to recover in the short term.
Looking ahead to Thursday, US jobless claims are expected to fall to 240,000 in the upcoming report, which could provide additional near-term support for the dollar if the claims decrease as anticipated. The previous report showed claims rising by 14,000 to 249,000 for the week ending July 27th, approaching a yearly high and exceeding the expected 236,000. Otherwise yields and the dollar could see more pressure.
Bitcoin is recovering to a certain extent from its declines after more than a week of losses. Investor sentiment could be improving, reducing selling pressure, after the latest panic over recession risks in the US. However, investors could continue to monitor US economic data in search for more clues on the direction of the economy.
At the same time, short and long liquidations remain flat, indicating potential investors’ caution and uncertainty about the cryptocurrency’s direction. Institutional investor apprehension is also significant. Recently, the Bitcoin ETFs saw significant outflows with over USD 148 million leaving the funds yesterday, registering a third session of outflows.
However, Ethereum ETFs were able to maintain investments coming in. Some ETFs recorded a string of inflows which could signal an interest in the asset. Stronger inflows could alleviate concerns about the direction of cryptoassets in general.
Meanwhile On Wednesday, oil prices pared recent losses due to rising tensions in the Middle East. The appointment of a new Gaza leader by Hamas has heightened concerns about more confrontations in the region. However, the upward momentum could be constrained by weak demand fears and sluggish growth from top oil importer China. In this regard, China’s crude oil imports plummeted to the lowest since September 2022.
Oil prices were also under pressure from a modest increase in API crude inventory data, halting multi-week streaks of sharp declines and easing supply concerns. US crude oil inventories increased by 180,000 barrels for the week ending August 2, along with rises in gasoline, distillate, and Cushing inventories.
Elsewhere, broader market downturns and fears of a US recession also underpinned the recent drop in oil prices, overshadowing concerns about Middle Eastern supply disruptions and reduced production in Libya’s Sharara oilfield.
Later today, the EIA will release its figures on crude and gasoline stocks. If the reports indicate an increase in stockpiles, this could further extend the selling pressure and limit the crude’s gains.
