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The US dollar surged during US trading hours as stocks plummeted while Treasury yields advanced. The catalyst was a slew of positive US data boosting the US dollar and concerns about a likely looming recession.
Economic Data
The US ISM Manufacturing PMI rose to 56.1 in May from 55.4 in the previous month, surpassing the market’s expectations. The unexpected increase in activity boosted the dollar while affecting demand for Treasuries. But yields also rose on the back of lingering inflation concerns and rate hikes speculation, with that on the 10-year Treasury note reaching an intraday high of 2.95%.
The focus now shifts to US employment-related data ahead of the ADP data on Thursday and the Nonfarm Payrolls report to be out on Friday.
Other Developments
The focus remained on inflation and growth and whether policymakers would tighten monetary policies further. The latest taking action was the Bank of Canada, which lifted interest rates by 50 bps to 1.5% on Wednesday. Policymakers noted that they are prepared to “act more forcefully if needed” to achieve their 2% inflation target.
The US Fed Beige Book brought up some interesting points. All the twelve districts reported continued economic growth, but the majority indicated slight or modest growth. Also, most districts informed of continued price rises, while three districts expressed concerns about a US recession.
Commodity-linked currencies were the best performers against the US dollar, as the AUD/USD pair retained gains and settled at around 0.7190, while USD/CAD flirted with 1.2600 before bouncing to the current 1.2630 price zone.
The EUR/USD pair edged sharply lower, ending the day in the 1.0650 price zone, while the GBP/USD settled just below 1.2500. The Japanese yen was the worst performer, as USD/JPY soared to 130.18, holding nearby early on Thursday.
Gossip on talks concerning a likely exit of Russia from OPEC+ impacted the global oil demand outlook. WTI crude is still laggard for the third successive day, despite the latest bounce off intraday lows, as fears surrounding growth and Russia’s exit from OPEC+ weigh on the black gold. That said, the quote remains pressured at around $112.50 after dropping to $112.11 during the early hours of Thursday’s Asian session.
Also Read:
NFP, ADP Employment Change Preview: US labour market retreats
WTI Crude falls on recession concerns, gossip on Russian exit from OPEC+
Fed’s Beige Book: Most districts exhibited slight to modest growth
US Shares Retreat After Key Economic Data
Biden: Cannot instantly reduce gasoline cost
Fed’s Bullard Skeptical on recession probabilities
US dollar rises on positive US economic data
US To Boost Economic Relations With Taiwan
Gold surges to $1850 despite higher T-yields
April’s US ISM Manufacturing data offers a mixed image on the state of industry
