The Power of the US Dollar (USD) Strengthens Amid Economic Uncertainty
The US Dollar (USD) has been flexing its muscles against major currency rivals, reaching its strongest level since mid-March above 104.00 on Thursday. As the market awaits the release of the first revision to the first-quarter Gross Domestic Product (GDP) growth by the US Bureau of Economic Analysis, all eyes are on the economic indicators. Additional data to be released includes the weekly Initial Jobless Claims and Pending Home Sales data for April.
US Dollar Dominates Amid Risk-Averse Market and Debt-Limit Negotiations
Amidst the uncertainty surrounding the outcome of the US debt-limit negotiations, a risk-averse market environment has allowed the USD to outperform its rivals mid-week. US House Speaker Kevin McCarthy's reassurance that the US would avoid default provided some relief, despite acknowledging differences over spending.
Hawkish Stance by Fed Governor Boosts US Dollar
Further fueling the USD's strength were hawkish comments made by Fed Governor Christopher Waller. Waller stated that he would not support halting rate hikes unless there was clear evidence of inflation moving down toward the 2% objective. This stance provided an additional boost to the currency. The minutes of the Fed's May policy meeting, released later in the day, revealed a split among policymakers regarding support for more interest rate increases. However, this publication failed to trigger a significant market reaction.
Mixed Market Sentiment and Flat Treasury Bond Yield
Early on Thursday, US stock index futures showed a mixed performance, with the Dow Futures losing nearly 0.5% and the technology-heavy Nasdaq Futures gaining over 1%. The benchmark 10-year US Treasury bond yield remained relatively flat near 3.75% after Wednesday's rally.
Euro Struggles and Pound Sterling Weakened
EUR/USD faced persistent bearish pressure and traded at its lowest level in over two months, dropping below 1.0750 early Wednesday. Germany's GDP data revealed a contraction of 0.5% in the first quarter, compared to the initial estimate of 0.1%.
Pound Sterling, despite stronger-than-expected Consumer Price Index (CPI) figures, failed to maintain its strength against the USD. GBP/USD closed at its lowest level since late March, below 1.2400 on Wednesday. The pair remained relatively quiet on Thursday, consolidating its weekly losses slightly above 1.2350.
USD/JPY Soars Amid Rising T-Bond Yields
Fueled by rising US Treasury bond yields, USD/JPY advanced toward 140.00, reaching its highest level since November. However, the pair experienced a technical correction during the European morning and traded modestly lower below 139.50 later in the day.
Gold Price Struggles as USD Strength and Treasury Yields Rise
Pressured by the broad strength of the USD and the significant rebound in the benchmark 10-year US Treasury bond yield, the price of Gold suffered substantial losses on Wednesday. XAU/USD struggled to gain traction and traded around $1,960 early Thursday.
Cryptocurrencies Experience Volatility
Bitcoin faced a decline of more than 3% on Wednesday and continued to slide in the Asian session on Thursday. After briefly dropping below $26,000, BTC/USD managed to recover a portion of its losses and was last seen trading near $26,200. Ethereum also fell 3% on Wednesday, breaking below $1,800.
Disclaimer: The information provided in this article is for educational and informational purposes only. It does not constitute financial advice or investment recommendations. The market for currencies and cryptocurrencies is highly volatile, and readers should conduct their own research and seek professional advice before