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US Dollar The Darling of the Currency Market

May 17, 2023

Brace yourself for a rollercoaster of news and excitement!

So, it seems like the Chinese re-opening story is moving at a snail's pace, testing everyone's patience. Industrial production and retail sales numbers didn't quite hit the mark, and although the overall unemployment rate looked good, there's a concerning rise in youth unemployment. It's clear that China's second-largest economy is sputtering rather than revving its engines. The big question now is, who's going to lose their cool first, the investors or the PBOC (People's Bank of China)?

Now, let's talk about oil. The lackluster Chinese economic indicators caused a slight dip in oil prices. But don't worry, folks! Despite the economic slowdown, Chinese travel demand is expected to keep the market afloat. However, there are still some short-term risks looming. The unresolved debt ceiling discussions and the chit-chat from Fed officials about higher interest rates have put a damper on things. And hey, guess what? The stronger USD is playing its part too, making crude oil pricier for offshore investors.

Hold your horses, because here comes the star of the show—the US Dollar! This week, it's taking the currency market by storm. The Fed officials have been talking a big game about the future of US interest rates, and that's given a boost to the greenback. On top of that, the pending debt ceiling deadline has made investors hesitant to take risks, which is actually good news for the US Dollar. As a result, other currencies like the euro, sterling, and AUD have taken a back seat while the US Dollar steals the spotlight. 

Ah, poor gold. It's taken a hit from the rising USD too. The price of gold has dipped below the US$2k mark as investors reevaluate the US yield outlook. The Fed officials are keeping the option of raising interest rates if inflation sticks around. This possibility of higher interest rates by the end of the year has got the greenback soaring, but it's left poor gold feeling a bit neglected. Don't count gold out though! It has shown resilience in the face of adversity, bouncing back whenever it dips below $2k. So, keep an eye on it, especially as long as it stays above key support levels like US$1970.

Shifting our focus to Asia, let's talk about the Nikkei. It put on quite a show with a surprisingly strong GDP print. Japan's preliminary GDP for the last quarter beat expectations at 0.4%, outshining the forecasted 0.2%. On the other hand, Australia's ASX200 was having a tough time due to some hawkish RBA minutes and weaker commodity prices. Now, all eyes are on the upcoming US building permits and housing starts data, as well as the never-ending debt ceiling discussions. Stay alert, folks! The closer we get to June without a resolution, the greater the chance of market volatility spiking.

So, there you have it! The currency market is a wild ride, with twists and turns at every corner. Stay tuned for more thrilling updates, and remember, the US Dollar is currently stealing the show!

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