Market Drivers – US Session: Can the Dollar Hold Its Ground as Markets Await Key Data, Fed Signals?

The US Dollar (USD) staged a recovery on Wednesday, May 14, 2025, at 11:36 PM +04, climbing past the 101.00 mark on the Dollar Index (DXY) as investors dialed back on riskier assets, bolstered by optimism surrounding US trade policies. This uptick occurred despite renewed market expectations for Federal Reserve rate cuts later in 2025, fueled by April’s cooling inflation data, which showed a year-over-year CPI increase of 2.3%. Rising US Treasury yields, with the 10-year note at 4.525%, further supported the Greenback’s advance, setting the stage for a critical Thursday packed with economic releases and Fed commentary that could shape its trajectory.

Thursday, May 15, promises a busy US economic calendar, featuring Retail Sales, Producer Price Index (PPI), the Philly Fed Manufacturing Index, Industrial and Manufacturing Production, Business Inventories, the NAHB Housing Market Index, and weekly Initial Jobless Claims. A speech from Fed Chair Jerome Powell, alongside comments from Vice Chair Michael Barr, will also draw scrutiny as markets seek clues on monetary policy direction. Across the Atlantic, EUR/USD slipped back to 1.1170 after touching weekly highs above 1.1200, while GBP/USD retreated to 1.3250 from a multi-day peak of 1.3360, pressured by a robust USD and anticipation of UK GDP data alongside other key releases like Business Investment and Industrial Production.

Elsewhere, USD/JPY dropped to a three-day low of 145.60, reflecting the USD’s mixed performance amid higher US and Japanese yields, with Japan’s Foreign Bond Investment and Machine Tool Orders data on the horizon. AUD/USD briefly hit 0.6500 before succumbing to selling pressure, driven by a stronger USD and ahead of Australia’s critical labor market report and Consumer Inflation Expectations. In commodities, WTI crude oil held near recent highs around $64.00 per barrel despite a slight dip, following a 3.5 million-barrel build in US crude inventories, while gold slumped to a five-week low of $3,170 per ounce and silver hit $32.00, both weighed down by trade optimism and a firmer USD.

The USD’s resilience comes against a backdrop of mixed market signals, with the recent US-China 90-day tariff suspension—reducing duties to 30% on Chinese imports and 10% on US goods—continuing to bolster sentiment, yet cooling inflation keeps rate cut hopes alive. US stocks showed a tech-driven uptick, with the Nasdaq gaining 1.5% to 18,979 points, though the Dow dipped 0.4% to 42,256 points, reflecting selective caution. As markets brace for Thursday’s data deluge and Fed insights, the USD’s ability to maintain its upward momentum will hinge on whether economic indicators reinforce the current optimism or shift focus back to monetary easing expectations.