The US dollar has been the biggest winner in recent trading sessions, thanks to rising bond yields and some risk-off flows.
Even the somewhat gloomy Beige Book from the Fed did not appear to be enough to halt the dollar's rise, as inflation and jobs indicators continue to show modest improvement.
Check out the rest of the market headlines to see what happened:
Titles:
- Australia Leading MI Index for April: 0.0% (previously -0.1%)
- ANZ Business Confidence Index May: 11.2 (previously 14.9)
- Australian CPI for April: 3.6% y/y (3.4% expected, 3.5% previous)
- Australian construction work completed for Q1: -2.9% qoq (+0.6% expected, 1.8% previous)
- Japan Consumer Confidence Index for May: 36.2 (39.1 expected, 38.3 previous)
- GfK German Consumer Climate Index for May: -20.9 (-22.5 expected, previous reading upgraded from -24.2 to -24.0)
- Preliminary German CPI for May: 0.1% m/m (0.2% expected, 0.5% previous)
- UBS Swiss Economic Prospects Index for April: 18.2 (previously 17.6)
- May US Richmond Manufacturing Index: 0 (-6 expected, -7 previous)
- Fed Beige Book: National economic activity expands but diversifies across regions, 'discretionary spending declines' due to price sensitivity, job gains 'negligible'
- New Zealand building approvals in April: -1.9% m/m (-0.2% previously)
Broad market price movement:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Yields, Bitcoin Overlay Chart by TradingView
Risk aversion sentiment was present early in the Asian trading session on Wednesday, as market participants continued to monitor geopolitical tensions in the Middle East. The S&P 500 index crawled lower, along with gold and crude oil, while the safe-haven dollar and bond yields made some gains.
Oil recovered slightly during the London trading session thanks to reports that OPEC+ may decide to keep production cuts in place for a little longer due to rising global inventory levels. However, the energy commodity soon joined the rest of risk assets in decline, with the dollar and Treasury yields rising.
Forex market behavior: US dollar against major currencies
Overlay of the US dollar against major currencies Chart by TradingView
The safe-haven dollar continued to benefit from the risk aversion caused by geopolitical tensions, advancing across the board before giving up a bit of ground against the Australian dollar ahead of the Australian CPI release.
The actual figure was better than expected by 3.6% on an annual basis, compared to the expected decrease from 3.5% to 3.4%. This allowed the Australian dollar to put up a very good fight against the US dollar until risk-off flows started to pick up later in the day, leaving the Australian dollar to close 0.62% lower against the US dollar.
Stronger-than-expected Richmond Manufacturing Survey data lifted the dollar further, with the reading coming in flat in May instead of the estimated -6 figure. However, the dollar pared some of its gains when the Fed's beige book indicated a lackluster assessment of the economy, with the majority of Fed districts reporting marginal job gains and declining consumer spending due to rising prices.
Other lower-yielding currencies, such as the Japanese yen and Swiss franc, were able to pare losses against the US dollar, while the oil-linked Canadian dollar followed weaker commodity prices to eventually close more than 0.5% in the red.
Potential catalysts coming on the economic calendar:
- Swiss GDP at 7:00 am GMT
- Swiss economic gauge KOF at 7:00 AM GMT
- Spanish CPI at 7:00 AM GMT
- Preliminary US GDP at 12:30 PM GMT
- US weekly jobless claims at 12:30 PM GMT
- US Home Sales Pending at 2:00 PM GMT
- US crude oil inventories from the US Energy Information Administration at 3:00 PM GMT
- Core CPI in Tokyo at 11:30pm GMT
- Japanese unemployment rate at 11:30 pm GMT
- Initial Japanese industrial production at 11:50 PM GMT
- Japanese retail sales at 11:50 PM GMT
This is sure to be an eventful day for the US dollar, as Uncle Sam prepares to issue the currency The second edition of the growth figure for the first quarter of 2024. Bearish revisions are being considered, which could impact the Fed's policy outlook and overall market sentiment, so be sure to check our Event guide for US preliminary GDP.
do not forget to Initial weekly report on unemployment claims Due at the same time tends to trigger strong intraday USD fluctuations as well!
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