Forex Today: Dollar remains on the backfoot

What you need to take care of on Wednesday, May 25:

The American dollar remained weak on Tuesday, despite the market mood being sour. The EUR/USD pair rallied beyond 1.0700 as more ECB officials vowed for a 50 bps rate hike. The GBP/USD pair, however, fell following softer-than-anticipated local data to end the day in the 1.2520 price zone.

S&P Global released the preliminary estimates of its May PMIs. Most European manufacturing and services indexes came in below the market’s expectation, except for the German ones, which were slightly better than April ones. The EU services PMI came down to 56.3 from 57.7 in the previous month, while the manufacturing index printed at 54.4, below the 54.9 expected.  

UK figures were also disappointing, as business activity slowed down to its weakest since early 2021, according to the official report. Finally, the company reported that the US manufacturing index slid to 57.5 as expected, while the services index contracted to 53.5 in the same period.

Meanwhile, inflation did not recede while the coronavirus-related lockdown in China exacerbated supply chain issues. In fact, JP Morgan downgraded China’s growth forecast to 3.7% from 4.3% in 2022, while other research institutes followed suit.

 The AUD/USD pair trades just below the 0.7100 level, while USD/CAD holds above 1.2800. Safe-haven currencies were sharply up, with USD/JPY down to 126.80.

Gold price trades near its weekly high at $1,869.71 a troy ounce, while crude oil prices posted modest gains. WTI is now changing hands at around $110.00 a barrel.

Asian and European indexes closed in the red. Wall Street spent most of the day in negative territory but managed to recover ground in the final hour of trading. The DJIA settled in positive territory, but its counterparts remained in the red.

Demand for safety boosted government bonds, with yields down to fresh weekly lows.

The Reserve Bank of New Zealand will announce its monetary policy decision and is expected to hike the main rate by 50 bps to 2%.

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