The US Dollar (USD) witnessed a modest recovery during the Asian session on Friday, though concerns linger over its near-term appeal. This comes in the wake of higher-than-expected Initial Jobless Claims (IJC) for the week ending May 3, underscoring the challenges faced by the United States (US) labor market amidst the Federal Reserve’s (Fed) restrictive policy framework.
The US Dollar Index (DXY), gauging the Greenback’s performance against six major currencies, saw a slight rebound after dipping to 105.00. Market sentiment remains cautious as investors await April’s US Inflation data, slated for release next Wednesday. The inflation figures are anticipated to offer crucial insights into the Fed’s potential interest rate trajectory, with speculation rife regarding rate reduction starting from September. Until then, market movements in the US Dollar are poised to be influenced by guidance from Fed speakers regarding interest rate adjustments.
During Asian trading hours, USD/JPY climbed to 155.77 despite Japan reporting a slower annual decline in Overall Household Spending at 1.2%, contrasting with the anticipated 2.4% contraction. However, subdued consumer spending poses challenges for the Bank of Japan (BoJ) in its pursuit of further interest rate hikes.
EUR/USD maintained its gains near a two-day high of 1.0780, exerting pressure on the US Dollar. Traders have already factored in the possibility of three rate cuts by the European Central Bank (ECB) this year.
GBP/USD sustained its gains above 1.2500, recovering from losses spurred by the Bank of England (BoE) announcements. While the BoE kept borrowing rates steady at 5.25% as expected, Governor Andrew Bailey’s dovish comments in the press conference hinted at a potential for more rate cuts than previously anticipated. Notably, two members of the Monetary Policy Committee (MPC), Swati Dhingra and Deputy Governor Dave Ramsden, advocated for a 25 basis points (bps) rate reduction to 5%.
Gold prices appear poised to end the week on a strong note, reaching $2,355 amid widespread speculation that the Fed may initiate interest rate cuts starting from the September meeting.
In contrast, AUD/USD witnessed a slight decline during the Asian session but maintained resilience above the psychological support level of 0.6000. Market focus now shifts to China’s forthcoming Consumer Price Index (CPI) data for April, set to be disclosed over the weekend, which is likely to influence the trajectory of the Australian Dollar (Aussie).
