The USD remained in demand yesterday after better than expected US data. First quarter figures for the following all came in higher, GDP at 1.3%, personal consumption at 3.8%, GDP price index at 4.2% and core PCE at 5%. Initial jobless claims for last week also dropped. Money markets continue to fade Fed rate cut expectations with year end pricing halving from 0.3% worth of cuts to 0.15%. Both GBPUSD and EURUSD remain near 2-month lows.
UK retail sales rose by 0.5% in April showing a recovery in UK spending patterns.
Roll back five months ago and the UK had the worst economic outlook amongst the G-7. That baton has now been handed to Germany, which ultimately will bring into question what this means for the rest of Europe.
* Daily move - against G10 rates at 5:00pm, 25.05.23
** Indicative rates - interbank rates at 5:00pm, 25.05.23
USD has softened a little bit this morning as negotiations over the debt ceiling are reportedly moving closer. However, USD could be back in demand later this afternoon should today's data from the US show inflationary pressures remain. The Core PCE numbers will be the focus and a higher number for April and we should see USD finish higher for the third consecutive week.
The USD continues its comeback as with US treasury yields continuing to climb as markets ease rate cut expectations by the Fed for this year. As a result, the USD index is now on to finish higher for the third consecutive week. The March highs could well be in sight.
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