Natural Gas (XNG/USD) treads water around $2.43 as bulls run out of steam amid early Tuesday, after a two-day uptrend. In doing so, the energy instrument seesaws around the highest levels in a month amid cautious markets ahead of the key China first quarter (Q1) Gross Domestic Product (GDP).

The XNG/USD’s recent run-up could be linked to the risk-on mood, as well as hopes of more energy demand. With this, the energy instrument fails to justify the latest US Dollar recovery amid hawkish Fed bets and upbeat US data.

That said, a waiver of Democratic City’s Natural Gas ban renews hopes of more XNG/USD demand. “A federal appeals court ruled unanimously Monday that a natural gas ban proposed by the City of Berkeley, California, would illegally circumvent federal law,” said Fox News. On the same line, hopes of China’s gradual recovery and receding fears of recession underpin the hopes of more Natural Gas demand.

However, the US Dollar strength prods the XNG/USD bulls as the US Dollar Index (DXY) stretched Friday’s rebound from a one-year low on Monday as upbeat US data and hawkish Fed talks joined the increasing odds of another Fed rate hike in May, as well as a reduction in the market’s bets suggesting a rate cut in later 2023. The same could be true for the US Treasury bond yields as the US 10-year and two-year bod coupons printed three-day uptrend to 3.60% and 4.20% respectively.

Talking about the data, the NY Empire State Manufacturing Index jumped to 10.8 for April while snapping the four-month downtrend, as well as marking the highest level since July last year. Further, the US National Association of Home Builders (NAHB) housing market index also rose for the fourth consecutive month in April to 45, versus 44 expected and prior reading. Also fueling the DXY were comments from the Fed officials as Richmond Fed President Thomas Barkin said on Monday that he wants to see more evidence of inflation settling back to target. The policymaker also added that he feels reassured by what he is seeing in the banking sector.

Furthermore, recent optimism on Wall Street and easing fears of global recession also allow the Natural Gas price to remain firmer. However, fears of warmer weather in the West and an unimpressive holiday season challenge the XNG/USD bulls.

Moving on, China’s Q1 GDP, expected 2.2% QoQ versus 0.0% prior, can offer immediate directions to the Natural Gas price ahead of the US PMIs and weekly gas inventory data from the US Energy Information Administration (EIA).