Forex Today: Will US data serve as a tie-breaker? Markets torn between HK worries, intrinsic optimism

Here is what you need to know on Thursday, May 28:

Markets are mixed and the dollar is looking for a new direction. Growing Sino-American tensions around Hong Kong are weighing on sentiment while recovery hopes are boosting it. US GDP and other figures are eyed.

Hong Kong: China is set to move forward and approve the new security law for HK despite protests on the streets and from the US. Secretary of State Mike Pompeo certified that the city-state is no longer autonomous while President Donald Trump is reportedly contemplating suspending Hong Kong's preferential tariff. It is essential to note that the financial hub's economic size in comparison to the Chinese economy is falling. 

Washington and Beijing are also at loggerheads over China's treatment of the Uighur minority in Xinjiang and the upcoming extradition of Huawei's CFO from Canada to the US. Nevertheless, both countries continue to uphold the trade deal.

The US reached the grim milestone of recording 100,000 COVID-19 deaths yet its share in global daily deaths has fallen to around a quarter in comparison to a third earlier this month. Investors are cheering the easing of restrictions and a return of activities, such as Disney's theme parks.

The US economic calendar is packed with events. The second read of the Gross Domestic Product will likely confirm the annualized contraction of 4.8% in the first quarter. Durable Goods Orders for April are set to show a double-digit downfall, while weekly jobless claims are forecast to remain above two million, with a growing focus on continuing applications.

See:

• GDP Preview, First Revision: Economic archeology
• Durable Goods Orders Preview: If the automobile dealerships are closed, how do you buy a car?
• Initial Jobless Claims Preview: The action moves to continue claims

Support from the central bank is also balancing concerns, with John Williams, President of the New York branch of the Federal Reserve, expressing optimism and pledging to keep supporting the economy. The outlier is the tech sector, where stocks are suffering from Trump's threat to slap an executive order curbing their operations – following Twitter's labeling of some of his tweets as requiring a fact check.

EUR/USD is trading close to the seven-week highs, buoyed by the European Commission's ambitious recovery plan. The most significant part is that it includes €500 billion of grants, funded by mutual borrowing – coronabonds in all but name. The plan still needs approvals, but with backing from Brussels as well as Paris and Berlin, the odds are high.

German and Spanish inflation figures are due out throughout the morning, leading to Friday's eurozone publication. The headline Consumer Price Index will likely remain depressed in both countries. 

GBP/USD is on the back foot amid another adverse twist in the Brexit saga. The UK continues insisting it will not seek an extension to the transition period. Moreover, Prime Minister Boris Johnson remains under pressure to dismiss Dominic Cummings – his powerful adviser that violated the lockdown. Britain is launching a test and trace application. 

Andrew Bailey, Governor of the Bank of England, reiterated that setting negative rates is a possibility in a Guardian op-ed. However, he did not hint that this option is imminent, cooling expectations and following the bank's Chief Economist Andy Haldane. 

WTI Oil is trading around $32, off the highs, and looking for a new direction. Gold has been on the rise, yet recovering from a dip below $1,700. The precious metal is currently moving in tandem with the market mood, but the inverse correlation may return. 

Cryptocurrencies have recovered with Bitcoin holding above $9,000.

More: Separating economic fact and fiction – A market discussion with Ed Moya