Key Takeaways:
- 💵 The dollar strengthened after strong U.S. retail sales, hitting a five-month high against the pound and euro
- 📈 U.S. economy shows solid growth, reducing the likelihood of the Fed cutting interest rates
- 🇺🇸 Markets predict a 41% chance of the Fed cutting rates in July, down from 50%
- 🗣 Federal Reserve Chair Jerome Powell is due to speak, his first comments since hot U.S. inflation data
- 🇪🇺 The euro weakened to its lowest level since Nov. 2 after the ECB signaled a potential rate cut
- 🇯🇵 The yen weakened to its lowest level since 1990, raising concerns of Japanese intervention
- 🇨🇳 The Chinese yuan fell to its lowest level since November
- 🔗 Other Asian currencies are also trading at multi-year or multi-month lows
- 🚫 Intervention may slow depreciation but cannot change the long-term trend
- 💼 The U.S. 10-year yield is at 4.63%, while Japan’s 10-year yield stands at 0.865%
Article:
The foreign exchange market has been experiencing notable shifts based on recent economic developments. The US dollar has seen a significant rise, reaching a five-month high against both the pound and euro. This surge was fueled by a 0.7% increase in U.S. retail sales, signaling strong economic growth and diminishing expectations for Federal Reserve interest rate cuts.
On the global front, markets are anticipating a 41% chance of the Fed cutting rates in July, down from a previous estimate of 50%. Federal Reserve Chair Jerome Powell is set to address these speculations in his upcoming speech, his first remarks since the release of hot U.S. inflation data.
Conversely, the euro has weakened to its lowest level since November 2 after the European Central Bank hinted at a potential rate cut. The Japanese yen has also seen a decline, hitting its weakest level since 1990, prompting concerns about possible Japanese intervention.
Furthermore, the Chinese yuan has dropped to its lowest point since November, alongside other Asian currencies trading at multi-year or multi-month lows. While intervention may temporarily slow depreciation, it cannot alter the long-term trend in currency fluctuations. The difference in 10-year yields between the U.S. and Japan also reflects the ongoing competitiveness between the dollar and yen in the foreign exchange market.