USD trades flat ahead of debt ceiling decision
Monday 22 May, 2023
Daily Currency UpdateThe USD consolidated its losses during the early part of the European session, breaking its six-day winning streak, and traded flat at the start of the US trading session. Markets are keeping a very close watch for any developments in the United States debt ceiling talks. A wider optimism around the ongoing debt limit discussion has provided support to the dollar. On the contrary, if the talks fail to lift the debt ceiling, this may trigger a US economic default, which could spark chaos in financial markets and a spike in interest rates.
President, Joe Biden, commented that calls with US House Speaker and Republican, Kevin McCarthy, went well and that talks will resume Monday morning. Federal Reserve’s Chief Executive, James Bullard, commented that the likelihood of a US recession is widely overstated. Bullard foresees a couple more rate hikes this year before hitting the base rate. It is going to be an action-packed week from the key data release front which could have a big impact on USD’s performance. Purchasing Manager’s Index (PMI) numbers will be released tomorrow, Federal Open Market Committee (FOMC) data release is scheduled for Wednesday, and Durable Goods data will be released on Friday along with the Personal Consumption Expenditures (PCE) Price Index.
Key MoversThe EUR/USD pair retreated from its intraday highs, dropping to 1.0810 levels. The European Central Bank (ECB) President, Christine Lagarde, commented earlier today, “I think we covered a large chunk of the journey toward taming inflation and bringing it back to our target.” The euro’s performance will be guided mainly by three things, consumer confidence, the first readings of the May PMI data, and the ongoing US debt ceiling discussions.
The GBP/USD pair attracted some positive traction and had a mild positive bias through the first half of the European session. GBP/USD was last seen trading at 1.2415 levels. The upside for the pair was mainly under the market expectations that fewer rate increases by the Bank of England (BoE) will be needed to cool down inflation. However, the market was left confused after BoE Governor, Andrew Bailey, commented that there were some signs of a cooling of inflation and that the labor market is loosening a little. The pair was recently seen with a lack of direction in the absence of any relevant market-moving economic data, either from the UK or the US.
Crude oil prices dip lower amidst concerns over global trade fears and a potential stall in overall growth after the antagonization of China at the G7 summit by the world’s leading economies. West Texas Intermediate (WTI) oil was last seen trading at the 71.74 level and Brent crude oil was seen trading at the 74.30 level.
- EUR/USD: 1.0800 - 1.0829 ▼
- GBP/USD: 1.2420 - 1.2469 ▼
- AUD/USD: 0.663 - 0.6665 ▼
- USD/CAD: 1.3487 - 1.3515 ▲