The dollar remains steady, investors await EU GDP numbers

With the US dollar scaling higher on Wednesday amid an upward trend in Treasury yields, the EUR/USD is on the defensive below 1.0700, and the yen dropped to a 20-year low, while the Bank of Japan (BOJ) has yet to indicate that it will end ultra-easy monetary policies.

However, Japan's economy appears to be recovering. According to data released earlier in the day, Japan's gross domestic product (GDP) declined by 0.5% in Q1, less than the initial estimate of 1.0%. Investors' confidence is sapped by higher inflation expectations and growth concerns, favouring the safe-haven dollar. Aside from the ECB's monetary policy meeting later in the week, investors await the eurozone's GDP figures on Wednesday. GDP growth is expected to remain at 0.3% and 5.1% for the quarter and year. 

Inflation expectations continue to set the mood, followed by fears of overreaction by central banks to combat that inflation and concerns about what that might do to global growth.

In the coming week or so, the market's argument over whether we are heading for a recession or a soft landing is likely to be clarified further, starting with US CPI on Friday, followed by PPI and the Fed meeting next week.

Oil prices consolidate

On Tuesday, the World Bank downgraded its global growth forecast by nearly a third to 2.9% for 2022, warning that Russia's invasion of Ukraine has complicated the consequences of the COVID-19 pandemic, and many countries now face recession as a result. Still, as the supply side continues to reflect low oil inventories, the oil market is expected to remain tight. With driving season and vacation time heating up, crude oil inventories will likely see more draws.

On Tuesday, China increased its first batch of product export quotas to reduce its high stockpiles domestically, which have risen as pandemic lockdowns have dented the demand for specific products. Despite the latest additions to the quotas, their volumes remain much lower than last year.