Forex Today – Asian Session: Rising US Yields and Risk Aversion Strengthen Dollar

Growth data from Japan for the first quarter and the Wage Price Index from Australia will be the highlights of the Asian session on Wednesday. Despite the mixed data and the ongoing debt ceiling drama, the US dollar has gained momentum.

Here’s what you need to know on Wednesday, May 17:

The US dollar strengthened across the board on Tuesday, buoyed by rising yields and mixed US data. The Dow Jones index experienced a loss of 1%, while the Nasdaq fell 0.18%. Investor sentiment remained cautious. The Dollar Index gained 0.20% and was last seen above 102.60.

“The president changed the scope of who is negotiating,” Kevin McCarthy, the top Republican in Congress, said during their talks on the debt ceiling. He sounded more optimistic about a deal to avoid a US default.

US retail sales they rose 0.4% in April, below the market consensus of 0.7%. However, the March figures were revised up from -1% to -0.7%. Industrial production grew 0.5% in April, beating the market consensus of 0%. On Wednesday, the United States will report on building permits and housing starts.

The Fed was aggressive on Tuesday. She mentioned that she would like to get to a point where interest rates could still go up or down: “I don’t think we’re at that rate containment yet.” More Fed speeches are scheduled for Wednesday. Earlier, the Fed’s Barking said that if inflation persists or accelerates “there is no barrier in my mind to further increases.”

The 10-year US Treasury yield rose to 3.57%, reaching its highest level in two weeks, before easing slightly. The 2-year yield reached 4.12%. European yields also rose, weighing on the Japanese yen. USD/JPY hit fresh weekly highs above 13660 before pulling back slightly. In Japan, preliminary data for GDP for the first quarter and industrial production for March will be published.

He EUR/USD it was rejected above 1.0900 and fell towards 1.0850. It continues to maintain a bearish tone and is trading near the area of ​​weekly lows. On Wednesday the latest inflation data for the Eurozone will be published. The GBP/USD pair. it failed to hold above 1.2500 and pulled back due to US dollar strength. The pound was also influenced by the UK data. The ILO unemployment rate unexpectedly rose from 3.8% to 3.9% in the three months to March, reaching the highest level in more than a year. The job applicant count also showed an unexpected increase of 46,7,000 in April, versus an expected decline of 108,000.

USD/CAD ended modestly higher, above 1.3470. The loonie strengthened broadly following Canadian inflation data, which beat expectations. The annual Consumer Price Index (CPI) unexpectedly accelerated for the first time since June 2022, reaching 4.4%.

RBC analysts wrote:

“Inflation in Canada accelerated in April, but has remained subdued overall since peaking in the summer of 2022. Early signs that the lagged effect of higher interest rates is weighing on economic growth suggest that underlying price pressures should continue to ease.” The BOC is expected to stay on the sidelines for the remainder of the year.”

The NZD/USD tried to rally but pulled back to 0/6230 after hitting 0.6258. The AUD/USD pair fell from 0.6700 to 0.6655. The Australian dollar lagged on weak Chinese data, RBA minutes and a larger-than-expected decline in the Westpac Consumer Confidence report for May. Australia will publish the wage price index on Wednesday and the employment report on Thursday.

Gold fell sharply below $2,000, remaining under pressure and potentially testing the crucial support level of $1,970. The Pcan also lost ground, falling to $23.60. The oil raw They retraced some of Monday’s gains, with WTI ending around $70.55. The Cryptocurrencies they also experienced losses; BTC/USD fell below $27,000 by 1.40%.