Here’s the rundown for Friday, May 10:
The US Dollar (USD) sees a modest rebound in the Asian trading session today. However, uncertainty looms over its short-term attractiveness following a higher-than-expected report on Initial Jobless Claims (IJC) for the week ending May 3. This suggests that the US labor market is facing challenges under the Federal Reserve’s (Fed) current policy stance.
The US Dollar Index (DXY), which measures the USD against six major currencies, bounces back slightly after dipping to 105.00. The direction of the USD in the near future hinges on April’s US inflation figures, scheduled for release next Wednesday. These data points will offer insights into whether the Fed might initiate interest rate adjustments starting from September. Until then, the trajectory of the USD will be influenced by remarks on interest rate policy from various Fed officials.
During the Asian trading session, the USD/JPY pair climbed to 155.77, despite Japan’s annual Overall Household Spending dropping at a slower rate of 1.2%, compared to investors’ anticipated contraction of 2.4%. Although the deceleration in household spending was less severe than predicted, subdued consumer expenditure poses challenges for the Bank of Japan’s (BoJ) objective of raising interest rates further.
EUR/USD maintains its upward momentum, hovering near a two-day peak of 1.0780, as the US Dollar faces downward pressure. Traders have already factored in expectations of three interest rate cuts by the European Central Bank (ECB) within the current year.
GBP/USD maintains the gains it achieved on Thursday, staying just above the 1.2500 mark. The currency pair recovered from losses incurred due to Bank of England (BoE) developments, which occurred alongside a significant decline in the US Dollar. As anticipated, the BoE decided to leave borrowing rates unchanged at 5.25%, but its statements regarding future interest rate trends leaned towards a dovish stance. During the press briefing, BoE Governor Andrew Bailey suggested the possibility of more rate reductions than what market observers had initially anticipated. Among the members of the Monetary Policy Committee (MPC), BoE policymaker Swati Dhingra and Deputy Governor Dave Ramsden advocated for a 25 basis points (bps) rate cut, pushing for a reduction to 5%.
The outlook for gold prices suggests a strong finish to the week. Spot prices climb to $2,355 fueled by robust speculation indicating the Federal Reserve’s potential initiation of interest rate cuts beginning with the September meeting.
Gold Price Gains Momentum Despite Hawkish Fedspeak
AUD/USD dips slightly in the Asian trading session but maintains resilience above the key psychological support level of 0.6000. The Australian dollar’s performance will be influenced by the release of China’s Consumer Price Index (CPI) data for April, scheduled for the upcoming weekend.
