Investors sought refuge on Thursday due to escalating concerns over a deepening banking crisis, causing the US Dollar Index to rise to its highest level in 10 days above 102.00.
Markets remained relatively calm on Friday as investors analyzed the latest data releases and kept an eye on the headlines regarding the US banking crisis. The Import and Export Price Index data will be highlighted in the US economic calendar, while the University of Michigan will release the Consumer Sentiment Survey for May.
PacWest reported that its deposits dropped by nearly 10%, causing the bank’s shares to fall more than 20%, and the financial heavy Dow Jones Industrial Average lost almost 0.7%. In the European morning, US stock index futures traded modestly higher.
As expected, the Bank of England raised its policy rate by 25 basis points to 4.5% and warned of further tightening if necessary. Despite the BoE revising inflation projections higher, Governor Andrew Bailey stated that there were good reasons to believe that the Consumer Price Index would fall sharply from April.
GBP/USD came under heavy bearish pressure after the BoE event on Thursday, losing more than 100 pips on the day.
Although the data from the UK revealed that the Gross Domestic Product contracted by 0.3% on a monthly basis in March, Industrial Production and Manufacturing Production both expanded by 0.7%. GBP/USD, however, largely ignored these data and was last seen posting small recovery gains above 1.2500.
EUR/USD fell to its weakest level in a month at 1.0900 on Thursday, but the pair staged a technical correction in the European morning. European Central Bank Vice President Luis de Guindos will deliver a speech later in the day.
Despite broad-based USD strength on Thursday, USD/JPY could not gather bullish momentum due to the risk-averse market atmosphere. Early Friday, the pair traded modestly higher on the day above 134.50.
Gold price failed to benefit from retreating US Treasury bond yields on Thursday, closing below $2,020. XAU/USD continued to trade negatively in the European session at around $2,010.
After two days of consolidation, Bitcoin faced renewed selling pressure on Thursday, continuing to decline early Friday. BTC/USD was last seen trading at its weakest level in nearly two months, falling below $26,300. Ethereum lost more than 2% on Thursday, closing below $1,800, and sellers retained control in the European session, with ETH/USD trading in the red at around $1,750.
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