Dollar struggles to find demand ahead of US inflation data

Here’s what you need to know on Friday, May 27:

As risk flows dominated financial markets on Thursday, major Wall Street indices posted impressive gains and the dollar continued to lose interest. Although the market mood appeared to have turned cautious early Friday, the US Dollar Index is trading at its lowest level in a month near the midpoint of 101.00. Data for the US Personal Consumer Expenditure (PCE) price index, the Fed’s preferred gauge of inflation, will be released later today. The US Bureau of Economic Analysis will also release personal income and personal spending data for April alongside the University of Michigan’s Consumer Confidence Index for May.

US Core PCE Preview: Why there is room for an upside surprise that drives the dollar higher.

Crude oil prices rose sharply on Thursday amid renewed supply concerns and a barrel of West Texas Intermediate (WTI) climbed to a 10-day high near $115. Earlier today, Russian Deputy Prime Minister Alexander Novak said he expected Russia’s oil production to decline to 480-500 million tonnes this year from 524 million tonnes in 2021. .

Bloomberg reported on Friday that Chinese Premier Li Keqiang had warned of dire consequences if he failed to prevent the economy from slipping further and noted that a contraction in the second quarter should be avoided. Meanwhile, the United States and Taiwan plan to announce economic talks to deepen their ties, which could be seen as a factor that could escalate geopolitical tensions between the United States and China.

EUR/USD took advantage of the selling pressure surrounding the dollar and hit a one-month high of 1.0765 before entering a consolidation phase. The pair remains on track to close the second consecutive week in positive territory.

GBP/USD posted small gains on Thursday and fluctuates in a relatively narrow channel above 1.2600 on Friday. Britain’s finance minister announced on Thursday that he would send one-off payments of £650 to around 8million of the country’s lowest income households.

After a consolidation of three days, AUD/USD gained ground during Asian trading hours and climbed above 0.7100. Australian data showed retail sales rose 0.9% on a monthly basis in April, in line with market expectations.

USD/JPY remains on the back foot and is trading near 127.00 early Friday. Bank of Japan Governor Haruhiko Kuroda noted on Friday that they do not expect prices to rise sustainably unless accompanied by higher wages.

Gold struggled to build bullish momentum on Thursday as the yield on benchmark 10-year U.S. Treasury bonds continued to rise and fall near 2.75%. XAU/USD remains calm on Friday and is moving sideways slightly above $1,850.

Bitcoin fell to a two-week low of $28,000 on Thursday. Although BTC/USD managed to erase a small portion of its losses ahead of the weekend, it continues to trade below the key $30,000 level. Ethereum suffered heavy losses in the second half of the week and lost almost 8% on Thursday. At press time, ETH/USD was down 1% on the day at $1,770.

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