Retail Sales and Fed Concerns Lift Dollar
The US dollar index (DXY) strengthened on Thursday (May 14) toward 98.80 and hit a two-week high after US retail sales rose 0.5% in April, confirming that consumption remains resilient despite high borrowing costs. This data prompted an adjustment in interest rate expectations and supported demand for the dollar, as US Treasury yields also rose.
Additional support for the greenback came from reports that Stephen Miran had submitted his resignation from the Fed Board of Governors, which is seen as paving the way for Kevin Warsh to assume the role of Fed Chair. This shift adds market focus to the direction of communication and policy preferences during the leadership transition period.
In G10 markets, EUR/USD weakened to around 1.1670 due to a combination of a stronger dollar and rising US yields. The euro continued to struggle to build momentum as market participants reassessed the outlook for US monetary policy amidst persistently high inflation.
GBP/USD fell to a one-month low around 1.3400, pressured by the dollar's dominance and renewed UK fiscal and political concerns. Gilt volatility and uncertainty surrounding Prime Minister Keir Starmer's economic agenda kept sterling vulnerable.
USD/JPY rose near 158.30 (a two-week high), supported by a widening US-Japan yield differential following strong US inflation data. The yen also lost some of its safe-haven demand as sentiment improved following constructive headlines from the Trump-Xi meeting.
Meanwhile, AUD/USD weakened to 0.7220 despite improving risk sentiment. White House officials said Trump and Xi discussed expanding economic cooperation, increasing Chinese investment, and plans to increase purchases of US agricultural products, but the strengthening dollar continues to limit recovery opportunities for riskier currencies.
The market will next monitor the direction of Treasury yields, further signals from the Fed following the shift in the board of governors, as well as developments in UK politics and follow-up US-China talks that could impact global risk appetite. (Arl)*
Source: Newsmaker.id
