The US Dollar

The US Dollar (USD) bounced back from early selling pressure, closing in positive territory on Monday, as the US Dollar Index (DXY) held its ground on Tuesday, with investors refraining from taking significant positions ahead of the much-awaited release of April inflation data from the United States (US) on Wednesday.

Later in the day, New York Federal Reserve President John Williams is scheduled to deliver a speech. However, the USD’s valuation is expected to continue being driven by risk perception, at least in the short term.

In other news, the NFIB Business Optimism Index slipped to 89 in April, slightly below market expectations of 89.6. Similarly, the IBD/TIPP Economic Optimism Index decreased to 41.6 in May from 47.4 in April, compared to analysts’ estimate of 48.2.

Fed Governor Philip Jefferson noted that the inflation rate is decreasing, and the economy is slowing down orderly, with the opportunity to continue expanding. The Fed’s Loan Officer Survey also revealed tighter standards and weaker demand for commercial and industrial (C&I) loans to large and middle-market firms.

Additionally, banks reported tighter standards and weaker demand for all commercial real estate loan categories.

Chicago Fed President Austan Goolsbee mentioned that it was too early to determine the next policy move due to uncertainties regarding the impact of credit tightening on the economy.

The benchmark 10-year US Treasury bond yield continued its rebound into a third straight day on Monday, gaining nearly 2%, but corrected lower early Tuesday, remaining slightly below 3.5%.

Wall Street’s main indexes closed mixed on Monday, with the Dow Jones Industrial Average (DJIA) losing 0.17%, and the Nasdaq Composite rising 0.25%. The S&P 500 Index opened lower on Tuesday, while the DJIA started the day near Monday’s closing level.

Markets are pricing in an 88% probability that the Fed will leave the policy rate unchanged in June, according to the CME Group FedWatch Tool.

Finally, the US Bureau of Labor Statistics (BLS) reported on Friday that Nonfarm Payrolls rose 253,000 in April, surpassing the market expectation of 179,000. However, March’s 236,000 increase got revised lower to 165,000, which was a negative note.

Overall, the US Dollar seems to be resilient as the market awaits the April inflation data, with investors being cautious in their positions.


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