Here is what you need to know on Friday, May 19:
Risk remains tepid at the start of the European session, as the Asian equities traded mixed, failing to benefit from the Wall Street rally. The US Dollar consolidates weekly gains near two-month highs, tracking the sluggish performance in the US Treasury yields across the curve.
The optimism around a potential US debt ceiling deal was faded by a Reuters report that cited, “the small but powerful Republican faction warned this week that they could try to block any agreement to raise the $31.4 trillion debt ceiling from passing the House of Representatives if the accord does not contain ‘robust’ federal spending cuts.”
Additionally, fresh US-Sino tensions over Taiwan are keeping traders cautious. US Trade Representative's (USTR) office announced late Thursday, “the US and Taiwan reached agreement on the first part of their ‘21st Century’ trade initiative, covering customs and border procedures, regulatory practices, and small business.” The US-Taiwan agreement clouds the outlook for a visit to the US next week by a Chinese commerce official.
The US stock futures, however, are adding 0.15% on the day, as markets continue to remain hopeful over a debt ceiling deal by Sunday when Biden and McCarthy resume talks.
Despite a risk-on market profile, the US Dollar extended its three-day upsurge on Thursday, courtesy of the hawkish comments from US Federal Reserve (Fed) policymakers and rising bets of a 25 basis points (bps) rate hike in June. Markets are now pricing a 36% probability of a 25 bps June rate hike vs. a mere 10% chance seen at the start of this week.
Dallas Fed President Lorie Logan said that data at this time does not support skipping an interest rate hike in the June meeting. Fed Governor Philip Jefferson noted that inflation remains too high whereas St Louis Fed President James Bullard advocated higher rates once again, suggesting that they are insurance against inflation.
Looking ahead, markets stay focussed on headlines concerning the US debt ceiling and speeches by central banks’ officials, in the absence of top-tier economic data releases on both sides of the Atlantic. Fed Chair Jereme Powell’s speech will hog the limelight while the end-of-the-week flows will likely remain in play.
EUR/USD is picking up fresh bids to resume the rebound toward 1.0800 early Europe, as the US Dollar corrects in tandem with the US Treasury bond yields. Eurostoxx futures are up 0.05%, at the moment. Citing sources, Bloomberg reported that the European Central Bank (ECB) is said to step up scrutiny of bank liquidity and may raise requirements.
GBP/USD is recapturing 1.2400, having briefly dipped below the latter. Bank of England (BoE) policymaker Jonathan Haskel is due to give a speech on how to measure productivity at the Economic Statistics Centre of Excellence Conference on economic measurement 2023 ‘New directions in the measurement of productivity: Integrating concepts and data at 09:45 GMT.
USD/JPY is seeing a sharp correction toward 138.00, as the Yen is recovering ground after inflation in Japan accelerated again in April, with the core Consumer Price Index rising 3.4% from a year earlier. Core-core CPI, which strips away energy and fresh food prices, climbed 4.1%, reaching the highest since September 1981.
AUD/USD is holding its recovery gains near 0.6650, shrugging off resurfacing US-Sino tensions. The US and Taiwan reached an agreement on the first part of their ‘21st Century’ trade initiative, covering customs and border procedures, regulatory practices, and small business. The US-Taiwan agreement clouds the outlook for a visit to the US next week by a Chinese commerce official, somewhat weighing on investors’ sentiment.
USD/CAD is trading under pressure below 1.3500 amid a pullback in the US Dollar and higher WTI prices.
Gold price is attempting a dead cat bounce to test $1,970, looking to recapture the critical 50-Daily Moving Average (DMA) support-turned-resistance at $1,985.
Cryptocurrencies are trading listlessly, with Bitcoin sidelined below $27,000 while Ethereum is challenging the $1,800 mark.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD extends recovery beyond 1.0400 amid Wall Street's turnaround
EUR/USD extends its recovery beyond 1.0400, helped by the better performance of Wall Street and softer-than-anticipated United States PCE inflation. Profit-taking ahead of the winter holidays also takes its toll.
GBP/USD nears 1.2600 on renewed USD weakness
GBP/USD extends its rebound from multi-month lows and approaches 1.2600. The US Dollar stays on the back foot after softer-than-expected PCE inflation data, helping the pair edge higher. Nevertheless, GBP/USD remains on track to end the week in negative territory.
Gold rises above $2,620 as US yields edge lower
Gold extends its daily rebound and trades above $2,620 on Friday. The benchmark 10-year US Treasury bond yield declines toward 4.5% following the PCE inflation data for November, helping XAU/USD stretch higher in the American session.
Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers
Bitcoin (BTC) slipped under the $100,000 milestone and touched the $96,000 level briefly on Friday, a sharp decline that has also hit hard prices of other altcoins and particularly meme coins.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.