Here is what you need to know on Friday, May 26:
The US Dollar strengthened yet again on Thursday for the fourth consecutive day of trade vs. a basket of currencies as per the DXY index. DXY rallied from a low of 103.84 to a high of 104.312.
US data pointed to a resilient economy while progress on US debt ceiling talks remained elusive, helping Treasury yields higher and the US Dollar to score its highest level in over two months. Traders were wary of a possible default in early June while US President Joe Biden and top congressional Republican Kevin McCarthy were still not able to put a deal together. However, the two sides are now just $70 billion apart on a deal according to market chatter.
As for data, the number of Americans filing new claims for unemployment benefits rose modestly last week, and the prior week's data was revised sharply lower, the Labor Department said. US Jobless Claims in the week to 20 May came in at 229k, slightly above the previous week but lower than expected. Elsewhere, it was shown that the US economy is growing quicker than expected with real Q1 Gross Domestic Product up 1.3% QoQ.
As for the Federal Reserve speak, Boston Fed President Susan Collins said on Thursday the time may be at hand for the Fed to push the pause button on its interest-rate-hiking campaign to assess the impact of past tightening.
In forex, EUR/USD was down 0.31% to 1.0715. The Japanese yen fell 0.52% versus the greenback to 140.16 per US Dollar as investors wait for Tokyo Consumer Price Index on Friday. GBP/USD fell to a low of 1.2309. AUD was under pressure as was the Kiwi ahead of Aussie Retail Sales today with AUD/USD hitting a fresh cycle low below 0.6500. Gold sank to its lowest level in two months on Thursday and Oil prices dropped by $3 a barrel after Russian Deputy Prime Minister Alexander Novak played down the prospect of further OPEC+ production cuts at its meeting next week. BTC rallied from the day´s lows in midday trade and traveled between a low of 25,878 and 26,611.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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