Forex News Roundup for 25 May, 2023

My FX List
May 25, 2023
  • The US Dollar maintains a strong position in the market, driven by growing anticipation of a 25 bps rate hike at the upcoming Federal Reserve meeting in June. This sentiment persists despite the release of the FOMC Meeting Minutes, which revealed an even division among FOMC members, leaning slightly towards a dovish stance against a rate hike in June. It is important to note that the minutes do not reflect the most current views.
  • The market’s expectation of a rate hike remains robust, despite the ongoing impasse in the US debt limit discussions, with policymakers struggling to reach a satisfactory resolution. This stalemate poses a potential risk to US credit ratings.
  • Fitch, a ratings agency, has placed the US AAA rating for long-term foreign-currency issuer default on negative watch, leading to a decline in the broader US stock market. However, there has been a significant recovery in tech stocks recently.
  • The US Dollar is exhibiting a strong upward movement in the Forex market, deviating from its long-term pattern. Notably, the New Zealand Dollar has weakened significantly while the US Dollar has gained strength, driving market activity thus far. Traders who follow trends are likely considering long positions in the USD/JPY currency pair, while short positions in NZD/USD may also appear appealing. The New Zealand Dollar continues to face pressure following a surprising announcement from the Reserve Bank of New Zealand (RBNZ) yesterday, indicating that its terminal interest rate had been reached.
  • The stock markets exhibit a mixed performance, as the spectre of the US debt ceiling issue casts a shadow over an otherwise bullish sentiment. Notably, the NASDAQ 100 Index has demonstrated substantial recovery in recent hours, indicating a prevailing bullish trend. The future trajectory of this index hinges on the resolution of the debt ceiling problem, as a positive outcome would likely propel it even higher.
  • Yesterday’s release of UK CPI (inflation) data revealed a month-on-month drop in annualised inflation from 10.1% to 8.7%, which was not as substantial as the projected decline to 8.2%. This outcome, being a less pronounced decrease in inflation, may be contributing to a modest slowdown in the Pound’s depreciation compared to other currencies during today’s trading.
  • Certain soft commodities have been exhibiting notable strength and reaching new highs as they follow strong trending patterns. A particularly noteworthy example is the Cocoa ETF (NIB), which experienced a significant surge on Friday, culminating in a closing price that marked a new five-year high.
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