Forex Today: Dollar hit by a not-that-aggressive Fed

Valeria Bednarik FXStreet

What you need to take care of on Thursday, May 26:

The greenback aimed to recover ground but pared its advance during US trading hours, ahead of the FOMC Meeting Minutes. The document showed that all members supported plans to reduce the balance sheet, while some added that, after the runoff was well underway, it would be appropriate to consider sales of mortgage-backed securities.

Also, all participants at the central bank’s May policy meeting agreed that a half-percentage-point interest rate hike was appropriate, while most judged such a hike would be appropriate at the next couple of meetings. Chances of a 0.50% rate increase in September have decreased sharply with the news, which in turn gave a late boost to Wall Street. Indexes posted substantial gains ahead of the close, after spending the day around their opening levels.

US government bond yields remained stable, ending the day little changed on Thursday.

Mounting tensions between the US and China after US President Joe Biden said that his country would militarily defend Taiwan in the event of a Chinese invasion weighed on the market’s mood, alongside slowing economic growth and lingering inflation.

The European Central Bank published the Financial Stability Review, which took its toll on the shared currency, as policymakers noted that "an abrupt increase in real interest rates could induce house price corrections” while adding that "further corrections in financial markets could be triggered by escalation of war, even weaker global growth or if the monetary policy needs to adjust faster than expected."

Data kept disappointing, as Durable Goods Orders were up a modest 0.4% in April, below the 0.6% expected.

The EUR/USD pair trades around 1.0680, while GBP/USD reached fresh daily highs at the end of the day, now trading around 1.2570. Commodity-linked currencies advanced during the American session against the greenback, with USD/CAD down to 1.2810 and AUD/USD pressuring the 0.7100 figure.

Gold recovered from $1,841.84 a troy ounce, a fresh weekly low, to settle around $1,855. Crude oil prices remained stable, as WTI trades at $110.60 a barrel.

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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