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Dollar shows uncertainty despite strong data

May 29, 2024

Key points:

  • Dollar index (DXY) remains flat just above 104.50
  • EUR/USD and GBP/USD fail to break key levels
  • U.S. consumer confidence rises unexpectedly in May

The dollar showed little direction on Wednesday, despite the rise in the U.S. Conference Board’s consumer confidence survey for May. This prevented further weakness in the dollar but left the DXY dollar index trading flat just above 104.50. The EUR/USD pair failed to push above 1.09, and GBP/USD could not sustain a rally above 1.28.

Chart showing the USDX index with key indicators and trends on VT Markets, a forex CFDs brokerage. The graph illustrates the dollar index (DXY) trading at 104.645, highlighting the currency's uncertainty despite strong economic data. The chart also mentions stable trading ranges for major exchange rates, including EUR/USD at 1.0853 and GBP/USD at 1.2763, reflecting the lack of clear direction from current economic data.

Picture: Dollar index trading at 104.648 as seen on VT Markets app.

Currencies hold steady with lack of clear economic signals

Currencies are likely to remain in tight trading ranges as current economic data have not provided major exchange rates with a clear direction. The DXY dollar index trades flat at 104.645, EUR/USD is steady at 1.0853, and GBP/USD is unchanged at 1.2763.

Also read: PCE data to play integral role in Fed rate decisions

In the Eurozone, bond markets are also struggling for direction as the European Central Bank is unlikely to offer new guidance on the timing of interest-rate cuts beyond June. A 25 basis point ECB rate cut in June is still widely expected. The 10-year German Bund yield rose 5.5 basis points to 2.636%, with similar increases seen in other eurozone government bond yields.

Japanese stocks slip, dragged by electronics and machinery

Japanese stocks ended lower, dragged down by the electronics and machinery sectors. The 10-year Japanese government bond yield hit a new 12-year high at 1.075%. The Nikkei Stock Average fell 0.8% to 38,556.87. Investors are closely monitoring U.S. economic data and their implications for monetary policy. USD/JPY traded at 157.10, slightly down from 157.17 the previous day.

Global government bonds were sold on Tuesday, driving yields higher. This was driven by strong U.S. data and comments from the Federal Reserve. The U.S. Conference Board’s consumer confidence indicator rose unexpectedly to 102.0 in May, easing fears of a significant economic slowdown.

Comments from Federal Reserve officials that interest-rate hikes are still on the table contributed to rising yields and lowered market expectations for a Fed rate cut in September.

China to expand property market support following Shanghai’s easing

In China, more cities are expected to introduce supportive policies for the property market following Shanghai’s recent easing of home-buying curbs. This indicates the government’s intent to stabilise the sector. Investors should watch for property sales data and measures addressing unfinished projects in the coming months.

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