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US dollar holds steady

Daily Currency Update

The US dollar remained in the seesaw stage as markets are waiting for next week's highly anticipated data release by US authorities and the central bank’s policy announcements. The key data under scrutiny will be the May Consumer Price Index (CPI), which is set to be released on Tuesday, and the Federal Reserve’s interest rate policy which will be announced on Wednesday. According to Reuters, Rabobank’s chief strategist Jane Foley commented that the Fed may be more likely to leave rates unchanged, rather than cut them. The USD is likely to gain a natural edge over the other major currency pairs in the current timeframe.

As per the US Census Bureau, the goods and services deficit for the United States tallied at $74.6 billion in April. The exports tumbled $9.2 billion to $249 billion, while imports rose $4.8 billion to $323.6 billion. Markets are anticipating another 25 basis point (bps) hike at the Fed’s policy meeting in June in spite of the stable resilience of main US fundamentals including employment figures and prices, hampering the USD’s latest rally.

Key Movers

In the absence of any high-tier data releases, the EUR/USD is in recovery and edged above the 1.0700 level after it dipped below the 1.0670 level earlier in the trading session. European Central Bank’s (ECB) governing council member Gabriel Makhlouf commented on Wednesday that the key rates are likely to stay there once they reach the "top of the ladder of increasing interest rates.”

GBP/USD gained positive traction to snap its 3-day losing streak, now trading at 1.2478 levels. The sterling is supported by market expectations that the Bank of England (BoE) will be more aggressive towards policy tightening to contain persistently high inflation. Markets are anticipating that the BoE may raise interest rates again from 4.5% to 4.75% during its June 22nd meeting and at the same time forecast a roughly 50% to 60% chance that rates will peak near 5.5% in 2023. Headline UK CPI fell less than expected in April and the closely watched measure of core prices rose to a 31-year high.

China disappointed the market in key data releases which showed exports shrank at a higher-than-expected pace in May and imports reduced too, though at a slower pace. The Yuan is currently trading at a 6-month low.

West Texas Intermediate (WTI) crude oil touched the 73 levels earlier today but slumped back to 72.63 levels amid the thin clouds over the upcoming Fed interest rate policy decision.

Expected Ranges

  • EUR/USD: 1.0670 - 1.0735 ▼
  • GBP/USD: 1.2397 - 1.2497 ▼
  • AUD/USD: 0.6662 - 0.6713 ▼
  • USD/CAD: 1.3334 - 1.3424 ▼