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On Thursday, Speaker Kevin McCarthy voiced optimism that negotiators have a structure now and are working two or three times a day. DeSantis suggests only he could beat Biden ahead of the expected 2024 launch. McCarthy also praised Biden’s picks to lead the talks – a move by the White House.
US stocks had another positive day, with the Dow Jones gaining 0.34% and the Nasdaq jumping 1.51%. Optimism about a debt ceiling deal, as well as upbeat economic data, fueled risk appetite. The US dollar rose across the board, even against high-yielding currencies. The US Dollar Index rose 0.65% to settle at 103.50, its highest level in two months. The dollar looks firm, however, most currency pairs show extreme oversold readings.
Economic Data
Economic data from the US came in above expectations, with the Federal Reserve Bank of Philadelphia’s regional factory index that rose from a reading of -31.3 for April to -10.4 in May.
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The number of first-time claims for weekly jobless benefits fell last week to 242,000, down 22,000 from 264,000 the week before, according to data published Thursday by the Department of Labour. Continuing claims, which are filed by people who have received jobless benefits for more than one week, dipped to 1.799 million for the week ended May 6 from a revised 1.807 million the week prior. Economists were forecasting the latest initial and continuing claims to land at a seasonally adjusted 254,000 and 1.818 million, respectively, according to consensus
Key Developments
Hawkish comments from Federal Reserve officials, along with hopes of a resolution to the debt ceiling drama, triggered a selloff in Treasury bonds. The US 10-year yield rose to 3.65%, the highest in two months. Investors continue to pare bets of Fed rate cuts by year-end and consider the possibility of another rate hike in June. More Fed talk is scheduled for Friday, including Chair Powell.
EUR/USD dropped towards 1.0750, falling for the fifth time in the last six trading days. On Friday, Germany will report the Producer Price Index for April. The European Central Bank (ECB) will release its Economic Bulletin, and ECB officials Schanbel and Lagarde will speak.
GBP/USD tumbled, testing levels under 1.2500. EUR/GBP finished flat around 0.8680, holding weekly losses.
The Japanese Yen was the worst performer, affected by rising government bond yields. USD/JPY advanced for the sixth consecutive day, reaching levels above 138.50, the highest since November. Inflation data from Japan is due on Friday.
The Australian dollar lagged following the Australian employment data. AUD/USD dropped below 0.6640 and is looking at 0.6600.
NZD/USD held above 0.6200 and posted modest losses after the presentation of the Budget and wholesale inflation figures. Trade data and Credit Card Spending are due in New Zealand.
USD/CAD rose toward 1.3500 and remains in a familiar range. On Friday, March retail sales will be released in Canada.
Gold suffered heavy losses after breaking the $1,970 support area and fell to $1,950. The yellow metal remains under pressure. Silver also lost ground, extending weekly losses, with XAG/USD settling at $23.50, the weakest close since late March.
What to watch on Friday?
The economic calendar is light on Friday. During the Asian session, New Zealand will report on exports and imports, as well as Credit Card Spending. Japan will release inflation data and the Tertiary Industry Index. Later in Europe, the highlight will be German wholesale inflation. The rally of the US dollar is in focus, and the slide in Gold price also deserves attention.
Also Read:
Updates: Will Biden, McCarthy reach a deal on debt ceiling?
Fed’s officials rule out tightening pause in June
Oil suffers losses amid stronger US dollar, rising inventories
