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Forex Today – Asian Session: Dollar Loses Momentum, Markets Remain Cautious

The latest Australian and Japanese PMIs, Q1 Australian capital spending and China’s Caixin manufacturing PMI are the highlights of the Asian session. Markets remain cautious, awaiting a positive resolution to the drama of the US debt ceiling. Later Thursday, US jobs data will be closely watched ahead of Friday’s Nonfarm Payrolls report.

Here’s what to know on Thursday, June 1:

Wall Street indices lost ground again on Wednesday as markets remained cautious. Stock prices ended off their lows. The rebound in stocks weighed on the US dollar, which was also affected by comments from Federal Reserve officials signaling a preference for a pause at the upcoming FOMC meeting. A positive outcome of the debt limit drama is expected in the ongoing debate in the US Congress.

Brown Brother Harriman analysts wrote:

We believe that the approval of the deal leaves the door wide open for a 25bp hike at the June 13-14 FOMC meeting. With the banking sector tensions easing, a possible default was really the only thing that could have prevented a rise next month. That said, the decision will ultimately depend on the data between now and that meeting, starting with this Friday’s jobs report.

US jobs data (JOLTS report) kept the door open for another rate hike. On Thursday, the ADP employment report and weekly jobless claims will be closely watched. The key report will be on Friday with the non-farm payrolls. The Beige Book noted that “economic activity was little changed overall in April and early May.”

The Dollar Index (DXY) rose 0.15% on Wednesday, missing its high. The DXY reached a two-month high at 104.70 and then fell back to 104.20.

Inflation data from Germany and France showed a decline in annual rates. The same is expected for the Eurozone Consumer Price Index (CPI) on Thursday. The euro weakened after the inflation figures. Market participants and European Central Bank (ECB) officials continue to expect rate hikes, but expectations have eased. The EUR/USD pair bottomed at 1.0630 and then bounced, buoyed by a broad correction in the US dollar. The pair bounced towards 1.0700. The trend is down, but the bearish momentum has subsided.

The Pound continues to perform well as more Bank of England rate hikes are expected to curb inflation. GBP/USD ended at daily highs after erasing losses, rising towards 1.2450. EUR/GBP accelerated lower, falling for the fourth day in a row. The cross closed below 0.8600, the weakest since December.

USD/JPY it fell for the third day in a row, settling below 139.50. Falling government bond yields in Europe and the US continue to support the Japanese Yen. Also, comments from Japanese officials about the strength of the Yen are helping the currency.

The Australian dollar did not benefit from higher-than-expected inflation in Australia, nor from Reserve Bank of Australia Governor Lowe’s comments suggesting rates could continue to rise.. The AUD/USD pair it ended mostly flat, hovering around 0.6500, after hitting fresh six-month lows at 0.6456.

The NZD/USD pair it pared losses during the American session and rose back above 0.6000, after trading below that area for the first time since mid-November.

During the American session, the Canadian dollar outperformed, supported by better than expected Canadian data. Real Gross Domestic Product grew at an annual rate of 3.1% in the first quarter, beating the 2.5% forecast and recovering from a 0.1% contraction in the fourth quarter. Advance GDP for April rose 0.2%. These figures increased the odds of a rate hike by the Bank of Canada next week. USD/CAD registered the lowest close in a week, around 1.3570. Once again, the pair found resistance at the 1.3650 zone. Short-term prospects are starting to look favourable.

The Turkish lira was once again the worst performing currency as it continued to depreciate after Erdogan’s victory in the presidential election. The USD/TRY hit new all-time highs above 20.70. A week ago, she was trading at 19.70.

He Gold It rallied moderately on falling yields, but pulled back to $1,960 after hitting $1,974. Silver rose to its highest level in a week above $23.50. Cryptocurrencies lost ground, with BTC/USD falling 2.35% to $27,120. Crude oil prices continued their downward trend, affected by the gloomy economic outlook, losing more than 2%.

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Source: Fx Street

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