Global Currencies Stand Firm Amid Fed’s Patient Stance
What’s going on here?
The dollar held strong against major currencies as markets digested Federal Reserve officials’ calls for patience. The New Zealand dollar crept up ahead of a key monetary policy decision.
What does this mean?
Last week’s mild
inflation
data had investors hopeful for US rate cuts this year, but Fed officials, including Governor Christopher Waller and Cleveland Fed President Loretta Mester, suggested a wait-and-see approach. They stressed the need for continuous positive inflation data before easing policies. This cautious tone steadied the dollar index at 104.61, after an overnight peak at 104.76. Analysts like Kyle Rodda noted that potential rate cuts hinge on further drops in inflation. Investors are now eyeing the upcoming Federal Reserve meeting minutes and the May 31 price consumption expenditure data for more insights into the bank’s outlook.
Why should I care?
For markets: Steady as she goes.
Global currencies remained stable, with the euro slightly up at $1.0858 and sterling at $1.2713, as focus shifted to key economic data releases. The European Central Bank’s wage tracker and euro zone PMI data are on the horizon, while the UK inflation report is expected to indicate a slowdown. The yen stayed flat at 156.20 against the dollar amidst cautious trading due to potential Japanese currency intervention.
The bigger picture: Central bank caution shapes economic outlook.
As central banks tread carefully, the broader economic landscape is taking shape. Japan saw an 8.3% rise in exports year-on-year for April, signaling strong trade activity. The New Zealand dollar edged up as markets awaited the Reserve Bank of New Zealand’s policy decision, likely to maintain a benchmark cash rate of 5.5%. The Australian dollar also made minor gains. Meanwhile, cryptocurrencies like bitcoin and ether rose, driven by speculative moves anticipating US spot ETF applications for ether.
