Forex Today – Asian Session: Dollar Remains Bearish

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What to watch for on Wednesday, May 25:

The US dollar remained weak on Tuesday, despite a sour market mood. The EUR/USD pair surged past 1.0700 as ECB officials promised a 50 basis point rate hike. The GBP/USD pair, however, fell after softer-than-expected local data and ended the day at the 1.2520 area.

S&P Global released preliminary estimates of its May PMIs. Most European manufacturing and services indices disappointed market expectations, except for the German ones, which were slightly better than in April. The EU services PMI fell to 56.3 from 57.7 in the previous month, while the manufacturing index came in at 54.4, lower than the 54.9 expected.

Figures from the UK were also disappointing as business activity slowed to its weakest level since early 2021, according to the official report. Lastly, the company reported that the US manufacturing index fell to 57.5, as expected, while the services index contracted to 53.5 in the same period.

On the other hand, inflation did not recede, while the coronavirus shutdown in China aggravated supply chain problems. Indeed, JP Morgan lowered China’s growth forecast to 3.7% from 4.3% in 2022, while other research institutes followed suit.

AUD/USD is trading just below the 0.7100 level, while USD/CAD remains above 1.2800. Haven currencies rose sharply, with USD/JPY dipping to 126.80.

The price of gold is trading near its weekly high at $1,869.71 a troy ounce, while crude oil prices post modest gains. WTI trades around $110 a barrel.

Asian and European indices closed lower. Wall Street spent most of the day in negative territory, but managed to regain ground in the last hour of trading. The DJIA moved into positive territory, but its peers continued lower.

The demand for safety boosted government bonds, whose yields fell to new weekly lows.

The Reserve Bank of New Zealand will announce its monetary policy decision and is expected to raise the main rate by 50 basis points to 2%.

Source: Fx Street

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