Dollar struggles to find demand ahead of US inflation data

With risk flows dominating the financial markets on Thursday, Wall Street’s main indexes registered impressive gains and the dollar continued to lose interest. Although the market mood seems to have turned cautious early Friday, the US Dollar Index trades at its lowest level in a month near the mid-101.00s. The US Personal Consumption Expenditures (PCE) Price Index data, the Fed’s preferred gauge of inflation, will be published later in the day. The US Bureau of Economic Analysis will also release the Personal Income and Personal Spending data for April alongside the University of Michigan’s Consumer Sentiment Index for May.

Crude oil prices rose sharply on Thursday amid renewed supply concerns and the barrel of West Texas Intermediate (WTI) climbed to its highest level in ten days near $115. Earlier in the day, Russian Deputy Prime Minister Alexander Novak said they were expecting Russia’s oil production to decline to 480-500 million tonnes this year from 524 million tonnes in 2021.

Chinese Premier Li Keqiang warned of dire consequences if they fail to prevent the economy from sliding further and noted that a contraction in the second quarter must be avoided. Meanwhile, the US and Taiwan are reportedly planning to announce economic talks to deepen their ties, which could be seen as a factor that could cause US-China geopolitical tensions to escalate.

EUR/USD took advantage of the selling pressure surrounding the dollar and advanced to its highest level in a month at 1.0765 before going into a consolidation phase. The pair remains on track to close the second straight week in positive territory.

GBP/USD registered small gains on Thursday and fluctuates in a relatively tight channel above 1.2600 on Friday. British Finance Minister announced on Thursday that they will be sending one-off £650 payments to around 8 million of the country’s lowest-income households.

Following a three-day consolidation, AUD/USD gained traction during the Asian trading hours and climbed above 0.7100. The data from Australia showed that Retail Sales rose by 0.9% on a monthly basis in April, matching the market expectation.

USD/JPY stays on the back foot and trades near 127.00 early Friday. Bank of Japan Governor Haruhiko Kuroda noted on Friday that they are not expecting prices to rise sustainably unless accompanied by wage hikes.

Gold struggled to gather bullish momentum on Thursday as the benchmark 10-year US Treasury bond yield continued to move up and down near 2.75%. XAU/USD stays calm on Friday and moves sideways slightly above $1,850.

Bitcoin dropped 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 nearly 8% on Thursday. At the time of press, ETH/USD was down 1% on the day at $1,770.

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