The US dollar index (DXY) dropped to roughly 97.90 on Friday. This decline followed reports of a fragile ceasefire between the US and Iran amid military happenings in the Middle East, which reduced the demand for safe-haven assets.
Market sentiment saw an uptick after U.S. President Donald Trump indicated that talks were ongoing, with both nations attempting to prevent further escalation around the Strait of Hormuz. A more relaxed geopolitical climate lowered the dollar’s demand, enabling risk-based currencies to gain ground. Concurrently, oil prices fell slightly, easing concerns about potential inflation spikes.
The latest U.S. nonfarm payrolls report indicated the economy added 115,000 jobs in April, surpassing market predictions of around 60,000. The unemployment rate held steady at 4.3%. However, there was a notable slowdown in average hourly wages, which might suggest that while the labor market looks solid, inflationary pressures could be easing.
Additionally, the dollar faced more downward pressure as the University of Michigan’s Consumer Sentiment Survey revealed a significant dip, reflecting households’ worries regarding inflation and economic uncertainty. US bond yields fell as well, further contributing to the dollar’s weakness.
EUR/USD is trading close to 1.1780, helped by the weaker dollar, with traders keeping a close eye on European Central Bank (ECB) developments. There are ongoing concerns about how fluctuating energy prices might impact future interest rate decisions in the eurozone.
GBP/USD climbed to about 1.3620, buoyed by the dollar’s retreat and stable UK economic predictions. Still, there’s a sense of caution in the momentum as traders assess geopolitical factors and global growth concerns.
The Japanese yen (JPY) has strengthened due to falling US bond yields, with USD/JPY retreating towards the 156.60 area. The demand for the yen remains robust amidst ongoing Middle Eastern tensions and global trade uncertainties.
AUD/USD has increased to around 0.7240, reflecting a more optimistic market sentiment and reduced need for the US dollar. The Australian dollar (AUD) has gained traction, as investors seem relieved over the possible de-escalation of geopolitical issues.
West Texas Intermediate (WTI) crude oil prices have come down from their recent peaks but remain above $95.30 per barrel. The market continues to be cautious about tanker movements in the Strait of Hormuz.
Gold prices are stable around $4,720, thanks to ongoing geopolitical concerns and lower US bond yields. However, strong upward momentum is being somewhat curtailed by reducing safe-haven demand.
Forthcoming central bank meetings and data releases
Monday, May 11th:
- China’s April CPI and PPI YoY change
- U.S. April used home sales month-on-month change
- UK April BRC Real Retail Sales YoY
Tuesday, May 12th:
- Australia’s May Westpac Consumer Confidence
- EU’s April HICP
- Germany’s May ZEW Survey Status and Economic Sentiment
- Australia budget announcement
- Four-week average of US ADP employment changes
- US April CPI and Core CPI
- US monthly budget statement for April
- Japan’s March current account NSA
Wednesday, May 13th:
- Australia Q1 Wage Price Index (QoQ)
- RBNZ’s QoQ inflation expectations for New Zealand’s second quarter
- France’s April CPI EU standard YoY change
- EU Q1 employment change quarterly
- EU Q1 GDP and QoQ GDP, EU Q1 GDP YoY
- EU March industrial production monthly
- US April PPI and Core PPI
Thursday, May 14th:
- Australia’s May consumer inflation expectations
- UK March GDP month-on-month change and Q1 GDP QoQ, YoY
- UK March industrial production monthly and manufacturing production
- Germany’s April HICP YoY
- New unemployment insurance claims in the US
- US April retail sales month-over-month
- New Zealand’s April Business PMI
Friday, May 15th:
- April CPI EU standard year-over-year and France’s April CPI YoY
- US May NY Empire State Manufacturing Business Index
- US April industrial production month-on-month
Looking ahead: Economic outlook insights
Monday, May 11th:
Tuesday, May 12th:
- Fed Williams speech
- ECB’s Elderson speech
- Fed Goolsby lecture
Wednesday, May 13th:
- Bank of England speech
- Fed’s Kashkari speech
- ECB Lane speech
- Speech by ECB President Lagarde
Thursday, May 14th:
- Speech by ECB President Lagarde
- Fed’s Schmitt speech
- Fed’s Hammack speech
- Fed Williams speech
- Fed Bar speech
