Forex Today: Recession fears keep backing the greenback

What you need to take care of on Wednesday, September 28:

Dollar buying paused early Tuesday but resumed following the release of better-than-expected US data, also helped by the poor performance of Wall Street. In addition, fears of a worldwide recession keep leading the market sentiment.

During the European morning, European Central Bank President Christine Lagarde and US Federal Reserve chief Jerome Powell attended an event about the opportunities and challenges of the tokenisation of finance. There was little reference to monetary policy, and they passed unnoticed. Both are scheduled to participate in different events on Wednesday, none directly linked to monetary policies.

US Federal Reserve officials tried to pour cold water into the dollar's recent strength. Fed's Charles Evans said he was getting concerned about going too far, too fast with rate hikes but added that his outlook is in line with the Fed's median assessment of rates at 4.25-4.50% at the end of 2022 and at 4.6% end of next year. Neel Kashkari said the central bank is moving "very aggressively," and there is a high risk of "overdoing it." Finally, James Bullard noted that inflation is a "serious" problem in the US.

US government bond yields started the day retreating from multi-year highs, picking up after the US opening. Hawkish comments from US policymakers on Monday sent yields to multi-year highs, and the yield on the 10-year Treasury note extended to 3.99% on Tuesday. The 2-year note currently yields 4.30%, slightly below its previous close.

The EUR/USD pair finished the day right below the 0.9600 mark, trading not far from the multi-year low posted at 0.9549. A steeper EU energy crisis adds pressure as early in the day, several leaks were detected in the Nord Stream pipelines, interrupting gas transportation from Russia to the EU.

The GBP/USD pair stabilized around 1.0700. Bank of England Chief Economist Huw Pill said that "normalizing monetary policy is not a race between countries and markets are sometimes uncomfortable with that," adding that it is hard not to draw conclusions that they will need significant monetary policy response.  

AUD/USD finished the day in the 0.6420 price zone, while USD/CAD settled at 1.3725. The dollar advanced against safe-haven currencies, with USD/CHF now trading at around 0.9920 and USD/JPY at 144.85.

Gold eased and trades just below $1,630 a troy ounce. Crude oil prices ticked higher, and WTI now changes hands at $78.50 a barrel.

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