Market participants continue to digest the latest economic data, central bank decisions and FOMC minutes as they await news on the debt ceiling drama. No major reports will be released in the Asian session. Later, Germany and the United States will publish new estimates of GDP for the first quarter. In the US, the weekly report on unemployment benefits applications will also be published.
Here’s what you need to know on Thursday, May 25:
The Dollar Index rose for the third day in a row and posted its highest daily close since March 17, just below 104.00. Risk Aversion sentiment continues to support the US Dollar. Wall Street indices experienced another drop, with the Dow Jones falling 0.77% and hitting its lowest level since late March. The unresolved issue of the debt ceiling continues to worry investors as negotiations continue in Washington without reaching an agreement.
The Minutes of the last FOMC meeting revealed a division among members regarding the future path of monetary policy adjustment. Some members highlighted the need for further rate hikes, while others argued that further tightening might not be necessary after this meeting. The US dollar maintained its gains after the release of the minutes. Weekly jobless claims, a new first-quarter GDP estimate, the Chicago Fed’s national activity index and pending home sales will be released on Thursday.
The pair EUR/USD it fell further and hit two-month lows below 1.0750. The pair is currently trading below the 20-week SMA for the first time since November. On Thursday, Germany will report a new estimate of first quarter GDP.
In the UK, data showed inflation fell to 8.7% in April, the lowest level since March 2022, but still above the market consensus of 8.2%. GBP/USD staged a brief recovery, but then continued its downward move, dipping to 1-month lows near 1.2360.
TD Securities analysts wrote:
Today’s inflation data has been surprising. Core inflation is proving much more persistent than expected, with the UK now a clear outlier compared to other major economies. As a result, we now expect two more rate hikes from the BOE, taking its terminal rate to 5.00% in August. The risk of new increases beyond August is still on the table if the inflation and employment data do not cool down.
USD/JPY broke above 139.00 and jumped to 139.40, reaching its highest level in almost six months. This rally was fueled by rising US bond yields, which strengthened the dollar against the Yen. Japan inflation data will be released on Friday.
The Reserve Bank of New Zealand (RBNZ) raised interest rates 25 basis points to 5.5%, signaling the end of monetary policy tightening. As a consequence, the Kiwi slumped, extending its losses throughout the day. The New Zealand currency was the worst performer, with NZD/USD losing over a hundred points and falling as low as 0.6100. For its part, the AUD/NZD exceeded 1.0700 points.
AUD/USD it also succumbed to the strength of the US dollar and was further dragged down by the fall of the kiwi, technical factors and the fall in commodities. Breaking the support zone of 0.6570/80, the pair plunged to 0.6528.
USD/CAD finally broke out of its consolidation phase and moved higher towards 1.3600 after several days. Gains were capped by a further rise in crude oil prices, with WTI rising 1.40% to $74.00 a barrel.
The Mexican Peso outperformed on Wednesday, with a USD/MXN which fell almost 1% and pulled back towards 17.75, thus erasing most of its recent losses.
The South African Reserve Bank (SARB) will hold its meeting on Thursday, with analysts forecasting an interest rate hike of 50 basis points to 8.25% due to the recent fall in the value of the South African rand. Meanwhile, the Central Bank of Turkey is expected to keep its interest rates unchanged at 8.50% ahead of the second round of the presidential election on Sunday. It is expected that the Bank of Korea and the Bank of Indonesia keep their interest rates at 3.50% and 5.75%, respectively.
Gold reversed its gains, moving back below $1,960 from $1,985 and remaining under pressure. the silver it also turned down and was testing the $23.00 level. The Cryptocurrencies experienced a sharp decline, with Bitcoin falling more than 3% and settling around $26,300.
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Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
