The Asian market opened on Wednesday (May 17), Beijing time, and the U.S. dollar index traded around 102. The U.S. dollar index rose in volatile trading on Tuesday. Major non-U.S. currencies were mixed against the U.S. dollar, with EUR/USD trading around 1.0868; EUR/USD fell 0.1% on Tuesday, GBP/USD hovered around 1.2485; GBP/USD fell 0.4% on Tuesday, USD/JPY traded Around 136.38; USD/JPY rose 0.2% on Tuesday. Today’s fundamentals focus on the 2023 FOMC voting committee at 18:30, the speech by Chicago Fed President Goolsbee and the annualized total of new housing starts in the United States in April at 20:30.
On the previous trading day, the closing price of the U.S. dollar index was 102.61, the spot closing price of RMB against the U.S. dollar was 6.9641, and the central parity rate of the RMB against the U.S. dollar was 6.9506, an increase of 148 basis points from the previous trading day. Today, the central parity rate of RMB against the US dollar is 6.9748, down 242 basis points.
Basic currency pair analysis:
EUR/USD: EUR/USD remains under pressure at monthly lows after breaking out of an immediate bullish channel formation. Nearly oversold RSI, multiple supports around 1.0845-35 challenge euro sellers. The pessimistic MACD signal, heavy resistance makes the euro bears full of hope.
GBP/USD: GBP/USD traded sideways above 1.2480 after breaking below the psychological support at 1.2500 in early Asian trade. Cable prices fell sharply after the White House reported that a decision to approve an increase in the U.S. borrowing cap had been delayed until the end of the week.
USD/JPY: USD/JPY retreated from session highs, hovering near two-week highs after strong growth in Japanese GDP. A hawkish Fed is betting that upbeat U.S. data will favor the yen against buyers. After the latest debt-ceiling talks, U.S. policymakers appeared optimistic about avoiding a default.
Review of yesterday’s news
1. Federal Reserve data: The real interest rate of the US federal funds was 5.08% on May 15, and the transaction volume was 126 billion U.S. dollars, while it was 5.08% on May 12, and the transaction volume was 124 billion U.S. dollars.
2. The annual rate of inflation in Canada unexpectedly rose in April as consumers paid more rent and mortgage interest costs. Data released today showed that Canada’s April CPI annual rate was 4.4%, while the previous market expectations were 4.1%. Meanwhile, the revised average and weighted median average of the underlying core inflation rate watched by the Bank of Canada was 4.2% in April, compared with 4.5% in the previous month. The short-term decline of USD/CAD extended to 30 points and is now at 1.3432.
3. Short-term government bond yields in the euro zone rose slightly after the release of the US retail sales data, and the two-year German bond yield rose 0.9 basis points to 2.651%.
4. Economists pointed out that if U.S. President Biden and U.S. House Speaker McCarthy fail to make real progress in reaching a debt ceiling agreement, we will definitely see the market increase expectations for a U.S. debt default. The potential negative impact on risk sentiment and currency markets means that, in this scenario, the upside risks to the USD and JPY are considerable.
List of key financial data and events on Wednesday:
13:30 ILO unemployment rate in France in the first quarter
17:00 Eurozone April CPI monthly rate
18:30 Speech by Goolsbee, 2023 FOMC voter and Chicago Fed Chairman
19:00 The meeting between US President Biden and congressional leaders on the debt ceiling reconvenes
19:15 2023 FOMC voting committee, Dallas Fed Chairman Logan chairs a meeting
20:30 The total number of new housing starts in the United States in April is annualized
20:30 The total number of building permits in the United States in April
23:00 2024 FOMC voting committee, Atlanta Fed President Bostic and 2023 FOMC voting committee, Chicago Fed President Goolsbee participate in a panel meeting on economic outlook and monetary policy
