Markets Await Fed Minutes, Dollar Dominates Global Currencies
The US dollar maintained its gains on Wednesday (May 20), as Brent crude held steady around $100 per barrel, following President Donald Trump's threat to resume attacks on Iran if a peace deal fails. The Bloomberg Dollar Spot Index rose 0.1%, extending its 0.4% gain from Tuesday's session. Meanwhile, yields on 2- and 10-year US Treasuries edged down by around 3 basis points, holding off earlier losses.
Trump stated that US strikes could resume in the coming days as part of a push to pressure Iran to reach a deal, after initially postponing military action. Meanwhile, talks between Xi Jinping and Vladimir Putin in Beijing affirmed the strategic relationship between China and Russia, providing additional geopolitical context for global markets.
In the currency market, GBP/USD briefly fell to 1.3375 before paring some losses, influenced by UK inflation data, which fell to its lowest level in more than a year. The decline in inflation prompted the market to trim expectations for a Bank of England interest rate hike, although economists warned that price pressures remained. The yield on the UK 2-year government bond fell 10 bps to 4.41%.
USD/JPY held steady at 159.07, while Japanese Finance Minister Satsuki Katayama reiterated readiness to intervene to support the yen. EUR/USD fell 0.2% to 1.1584, its lowest level since April 7, as the euro's bullish momentum weakened. EUR/GBP fell 0.1% to 0.8656, marking a third consecutive losing streak, the longest in more than two months.
The market now awaits the release of the FOMC minutes for clues on the direction of the Federal Reserve's interest rate policy, which is key to the movement of the dollar and other global currency pairs. Options activity in Europe was recorded at 70%-75% of average, but large investor involvement in the spot market was relatively minimal.
Overall, the dollar remained supported by geopolitical uncertainty in the Middle East and expectations of a more hawkish Fed, while the euro and yen faced pressure from global risks and market intervention. (Arl)*
Source: Newsmaker.id
