Market Summary:
On Wednesday (May 8th), the U.S. Dollar Index fluctuated around 105.5, finally closing with a gain of 0.13%, at 105.51. The yield on 10-year U.S. Treasuries rebounded, closing at 4.501%. The yield on 2-year U.S. Treasuries, which is most sensitive to Federal Reserve policy rates, ended at 4.845%.
Gold prices held steady on Wednesday (May 8th) as investors waited for U.S. data that could provide clues on possible Federal Reserve rate cuts. Geopolitical tensions supported gold prices, but a slight rise in the dollar limited its upside.
Oil prices saw a slight recovery following data showing a decline in U.S. crude inventories last week. WTI crude temporarily rose to a daily high of $78.91 on Wednesday (May 8th), finally closing up 1%, at $78.89 per barrel; Brent crude ended up 0.74%, at $83.53 per barrel.
Data and news released the day before:
With markets focused on the direction of major central banks' monetary policies, the dollar strengthened against the euro, the British pound, the yen, and the Swedish krona, while weakening against the Swiss franc and the Canadian dollar, creating a strong, fluctuating trend in the Dollar Index, which rose 0.13% to close at 105.546.
Vassili Serebriakov, FX strategist at UBS, stated that carry trades remain attractive and the market still prefers to buy USD against the yen when the rate lowers. According to Serebriakov, as long as there are no major changes in the U.S. economic outlook, the patter in the FX market is unlikely to change significantly.
Kathleen Brooks, Head of Research at XTB UK, mentioned that the focus is on several European central banks' potential rate cuts in the coming months, whether in June or August. Although there is nearly a 50% chance of the Fed cutting rates in September, this may be postponed. Currently, the market is particularly focused on Europe cutting rates first, which has driven the dollar higher.
Forex broker Monex, USA, stated early on the 8th that after the Swiss National Bank started cutting rates in March, the Swedish central bank cut interest rates on the 8th, strengthening the dollar for the third consecutive day. Ahead of the Bank of England's new monetary policy decision on the 9th, the pound fell to its lowest in more than two weeks. Although the Bank of England is not expected to cut rates, the question is whether it will shift towards a dovish stance like the ECB in June. The chances of a rate cut by the Bank of England in August have risen to around 50%.
The Swedish central bank announced a rate cut of 25 basis points on the 8th and anticipated two more cuts this year, leading to a weakening of the Swedish krona.
Sources in Egypt revealed that significant consensus was reached on some contentious issues during ceasefire talks in Gaza. Israel warned U.S. officials that halting military aid could jeopardize hostage negotiations.
Susan Collins, President of the Boston Fed, suggested that cooling the economy might be necessary to achieve the 2% inflation target. Maintaining interest rates steady for longer would slow economic growth; Fed Governor Cook said they would monitor the rise in default rates for credit cards and car loans.
According to anonymous officials cited by Tokyo TV, Japanese authorities intervened in the Forex market twice last week. Bank of Japan Governor Kazuo Ueda stated that accelerating the pace of interest rate hikes is appropriate if inflation risks increase; conversely, extending dovish policy is warranted if deflation risks grow. The BOJ does not rule out any options in the event of significant shocks, ultimately adjusting its bond purchase volumes as needed.
ECB official Enria said a path to cutting rates this year is seen, with room for a 50 basis point cut, but the timing will be data-dependent. Conversely, official Holzmann believes there is no reason to lower rates too quickly or too steeply.
The World Gold Council reported that gold prices reached an all-time high in April. It is expected that interest rates will remain unchanged for an extended period, with a "no-landing" scenario more likely, although stagflation risks are rising.
On Thursday (May 9th) during the Asian morning session, spot gold traded narrowly, currently around $2308.75 per ounce. Gold prices steadied on Wednesday, as investors awaited U.S. data for clues on possible Federal Reserve rate cuts, while geopolitical tensions supported gold prices, but a slight uptick in the dollar limited its upside.
The dollar rose by 0.13%, with the latest data showing U.S. job creation below expectations, alongside a tendency for Fed policy easing, consolidating expectations for possible rate cuts by year-end. However, bets on the U.S. economy outperforming other major economies strengthened the dollar, reducing gold's appeal to forex holders.
Daniel Ghai, a commodities strategist at TD Securities, stated: "The market may be waiting for a catalyst for further upside, although limited participation by fund managers seems to have restricted downside for gold."
Susan Collins, President of the Boston Fed Bank, said on Wednesday that the American economy needs to cool down, which is a way to return inflation to the Fed's 2% target.
Investors are currently focusing on the University of Michigan's consumer confidence index on Friday and comments from several Fed officials this week. U.S. consumer price index data will be released on May 15th.
Dollar Index Technical Analysis:
The Dollar Index faced resistance below 105.65 on Wednesday, finding support above 105.30, suggesting the dollar may maintain its upward trend after short-term declines. If the index stabilizes above 105.20 today, the target for further gains would be between 105.70--105.80. Today, short-term resistance lies at 105.65--105.70, with significant resistance at 105.75--105.80. Short-term support is at 105.35--105.40, with important support at 105.20--105.25.
EUR/USD Technical Analysis:
EUR/USD found support above 1.0735 on Wednesday, facing resistance below 1.0760, which suggests the pair may maintain its downward trend after short-term gains. If EUR/USD faces resistance below 1.0760 today, the target for further declines would be between 1.0730--1.0720. Today, short-term resistance is at 1.0755--1.0760, with significant resistance at 1.0765--1.0770. Short-term support is at 1.0730--1.0735, with important support at 1.0720--1.0725.
