Weekly Market Update 28 May – Little change in Dollar on data release, Markets watch Central Banks for signals
Weekly Market Update 28 May – Little change in Dollar on data release, Markets watch Central Banks for signals
1. The dollar index rose on Friday before pulling back as traders tidied positions ahead of month-end, as new economic data confirm expectations about US inflation and recovery. There was little reaction in the bond and stock markets as consumer prices increased in April over 3%, far beyond the Fed’s 2% annual rate target. The market is looking ahead to the June FOMC meeting which could provide clues to when interest rates will increase.
2. The yen is expected to weaken the most among other major currencies against the dollar, as Japan’s recovery from the pandemic remains troubled. Unemployment rate rose to 2.8% in April and consumer prices are falling, as the government considers moves to extend emergency pandemic restrictions in Tokyo and other areas. The dollar reached a seven-week high against the yen early on Friday before easing to previous levels.
3. The GBP held on to gains as a BOE official comments indicated hawkish sentiments on conditions where a rate hike in 2022 may be appropriate. The market will be paying close attention to the BOE governor’s speech next week for any further hawkish signals. In the Eurozone, ECB officials noted that there is no reason to change the pace of Pandemic Emergency Purchase Programme, sapping the EUR’s momentum ahead of the policy meeting in June.
