- US Dollar Index licks its wounds after falling the most in two months.
- US Jobless Claims jumps to the highest since October 2021 and pushes back Fed hawks.
- IMF urges Fed, other central banks to keep tightening monetary policies to tame inflation fears.
- Risk catalysts, bond market moves eyed for directions ahead of next week’s US CPI, FOMC.
US Dollar Index (DXY) bears the burden of the downbeat US data as it remains pressured near 103.30 during the early hours of Friday’s Asian session. It should be noted that the greenback’s gauge versus the six major currencies dropped the most in two months the previous day as United States statistics keep pushing back the Federal Reserve (Fed) hawks ahead of the next week’s Federal Open Market Committee (FOMC) monetary policy meeting.
That said, US Initial Jobless Claims rose to 261K in the week ended on June 02 versus 235K expected and 233K prior (revised). With this, the four-week average rose to 237.25K from 229.75K previous readings. Further, the Continuing Jobless Claims dropped to 1.757M in the week ended on May 26 from 1.794M prior (revised), compared to 1.8M market forecasts. Earlier in the week, the US ISM Services PMI, S&P Global PMIs and Factory Orders also printed downbeat outcomes and pushed back the Fed hawks while weighing on the US Dollar Index (DXY).
While the US data weighed on the Fed outlook, a surprisingly hawkish performance of the Bank of Canada (BoC) and the Reserve Bank of Australia (RBA) offered extra reasons for the DXY traders to prepare for the next week's FOMC. Furthermore, optimism surrounding China, per comments from Li Yunze, Director of China's National Administration of Financial Regulation, also weighed on the US Dollar.
In doing so, the DXY ignores hawkish comments from International Monetary Fund (IMF) spokesperson Julie Kozack. On Thursday, the global lender flagged the inflation woes and pushed major central banks, including the US Federal Reserve (Fed), towards further rate hikes. "If inflation does prove to be more persistent than expected, then the Fed may need to push interest rates higher for longer," IMF’s Kozack told reporters at a regular briefing.
Amid these plays, the US Treasury bond yields slumped while Wall Street benchmarks rose and exerted downside pressure on the greenback. That said, the benchmark US 10-year Treasury bond yields reversed from the highest levels in a fortnight to 3.72% whereas the two-year counterpart also snapped a two-day winning streak to drop to 4.52% at the latest. It should be noted, however, that the S&P500 Futures struggle for clear directions.
Looking ahead, a light calendar can keep the US Dollar Index on its way to posting the second weekly loss while bracing for the next week’s Consumer Price Index (CPI) and the Fed monetary policy meeting.
A daily closing below the three-week-old previous support line, now immediate resistance near 103.85, directs the DXY bears towards the 100-DMA level surrounding 103.00.
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