Risk-on flows characterized yesterday’s trading as traders piled into equities while the USD was sold-off aggressively. US equity indices posted solid gains as the overall situation remains oversold, likely prompting a bear market rally in the following days. However, Wednesday saw some profit-taking from Tuesday’s advance.
Dollar eases notably
Jerome Powell, the chairman of the Federal Reserve, gave a speech on Tuesday. Powell failed to surprise markets by stating that the Fed is comfortable with rate rises of 50 basis points. However, he also indicated that the pace of increases might be accelerated or slowed depending on the state of the economy. In addition, Powell stated that the US economy’s fundamental strength is quite strong at the moment.
Moreover, on Tuesday, retail sales in the United States gained 0.9% in April, boosted by higher autos, gadgets, and dining out sales. According to Bloomberg consensus figures, economists expected a 1.0% increase. The dollar remained pressured after the data.
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After climbing 1.1% Tuesday, the euro reached 1.0560 today, its highest daily percentage gain since March. The pound rose 1.4% in tandem to 1.2500, its highest level since late 2020, as reports showed the UK’s unemployment rate fell to a 48-year low. As a result, the dollar index fell to its lowest level.
“The pound got a boost from the robust jobs report yesterday, and on top of that, there has been a slight improvement in the broader risk sentiment in financial markets driven by some positive news out of China on the lockdowns and strong data out of the US,” Commonwealth Bank Of Australia currency strategist Carol Kong told Reuters.
In addition, US yields remain close to their cycle highs, putting further pressure on precious metals. Silver trades near two-year lows at 21.50 USD, while gold fell to 1,800 USD. On the other hand, oil is enjoying steady gains amid geopolitical tensions and solid inflation, rising toward 115 USD this week.
Later today, EU inflation numbers for April are due and should confirm the highest inflation in the history of the Eurozone. During the US session, building permits and housing starts are seen declining amid soaring mortgage rates.
Additionally, Canadian inflation data are due, likely causing volatility in the USDCAD pair.