Forex Today: Steadily cooling US labor market keep US Dollar on edge

Here is what you need to know on Friday, May 10:

The US Dollar (USD) recovers modestly during the Asian session on Friday. However, the near-term appeal is still uncertain as higher-than-projected Initial Jobless Claims (IJC) for the week ending May 3 indicated that the United States (US) labor market is struggling to bear the burden of Federal Reserve’s (Fed) restrictive policy framework.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rebounds slightly after tumbling to 105.00. The next move in the US Dollar will be guided by April’s US Inflation data, which will be published on Wednesday. The inflation data will provide meaningful cues about whether the Fed will start reducing interest rates from September. Till then, interest rate guidance from Fed speakers will drive movement in the US Dollar.

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the British Pound.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.06%	-0.03%	-0.11%	-0.05%	-0.16%	-0.18%	-0.06%
EUR	0.06%		0.03%	-0.05%	-0.00%	-0.10%	-0.11%	-0.01%
GBP	0.03%	-0.03%		-0.08%	-0.03%	-0.12%	-0.12%	-0.04%
JPY	0.11%	0.05%	0.08%		-0.03%	-0.10%	-0.07%	0.00%
CAD	0.05%	0.00%	0.03%	0.03%		-0.11%	-0.10%	-0.01%
AUD	0.16%	0.10%	0.12%	0.10%	0.11%		0.00%	0.05%
NZD	0.18%	0.11%	0.12%	0.07%	0.10%	-0.01%		0.08%
CHF	0.06%	0.01%	0.04%	-0.01%	0.01%	-0.05%	-0.08%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

In the Asian trading hours, USD/JPY rose to 155.77 even though Japan’s annual Overall Household Spending declined at a slower pace of 1.2% against a contraction of 2.4% expected by investors. Though the decline in the households’ spending was slower than expected, weak consumer spending is unfavorable for the Bank of Japan’s (BoJ) intention to hike interest rates further.

EUR/USD holds gains near two-day high of 1.0780 as US Dollar comes under pressure. Traders have already priced in three rate cuts by the European Central Bank (ECB) this year.

GBP/USD holds’ Thursday’s gains slightly above 1.2500. The Cable covered BoE-led losses after a sharp fall in the US Dollar. The BoE kept borrowing rates steady at 5.25% as expected but its communication on the interest rate outlook was dovish. In the press conference, BoE Governor Andrew Bailey said the central bank could deliver more rate cuts than what market participants had anticipated. Out of the nine-members-led Monetary Policy Committee (MPC) team, BoE policymaker Swati Dhingra and Deputy Governor Dave Ramsden voted for a rate cut by 25 basis points (bps) to 5%.

Gold price looks set to close the week on a strong note. Spot prices rise to $2,355 amid firm speculation that the Fed will start reducing interest rates from the September meeting.

Gold price gains momentum despite hawkish Fedspeak

AUD/USD edges down during the Asian session but holds strength above the psychological support of 0.6000. The Aussie will be driven by China’s Consumer Price Index (CPI) data for April, which will be published over the weekend.

Australian Dollar hovers above a psychological level, US Consumer Sentiment awaited

(This story was corrected on May 10 at 06:20 GMT to say that USD/JPY rose to 155.77, not 155.66).

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

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