Investing.com – On Wednesday, the DXY index rose past the 105 mark. This move sparked debates among market watchers about whether this signifies the beginning of a new upward trend or is merely a continuation of range trading amid a period of low volatility. The recent pattern of weak results from two-year, five-year and seven-year US Treasury bond auctions has contributed to longer-term US yields rising by nearly 25 basis points over the past few weeks. This increase in returns has put downward pressure on equity markets.
The decline in stocks appears to have allowed the dollar to align with more stable US short-term interest rates, most notably the two-year US dollar swap rate, which has risen back to 4.85%. This reflects a recalibration of market expectations regarding the likelihood of the Fed easing monetary policy.
Overnight developments indicated the possibility of US Treasuries receiving additional support. The successful two-year Japan Government Bond (JGB) auction helped limit the rise in JGB yields, which in turn was a contributing factor to the increase in Treasury yields. In addition, the latest release of the Fed's Beige Book appeared to lean toward dovish, with notes about a somewhat more pessimistic economic outlook and a shift in labor market dynamics, including lower employee turnover and increased bargaining power of employers.
Today, investors are anticipating the release of revised US GDP data for the first quarter of 2024, which is expected to show a slight downward revision, along with the quarterly core PCE price index, which is expected to remain at an annualized rate of 3.7% on a quarter-on-quarter basis. annual. However, the upcoming release of core PCE price data for April on Friday is expected to be more important for the market's direction. Additional economic indicators scheduled for release include weekly jobless claims and trade data for April.
Friday's inflation data results are expected to be a decisive factor in determining the dollar's next important direction.
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