On Friday, ING observed that the U.S. dollar strengthened moderately amid hawkish views from the Federal Reserve and a cooling global risk appetite. This uptick occurred despite some local indicators pointing in the opposite direction for the currency. U.S. markets are preparing for a pause due to the upcoming Memorial Day holiday, leading to a close on Monday.
Last week, significant data releases in the U.S. did not make much impact, but Thursday’s S&P Global PMI provided unexpected support, bolstering the dollar’s recovery. The Composite PMI rose to 54.4, positioning the U.S. ahead of the Eurozone and the UK and challenging the narrative of synchronized growth among regions.
Friday’s release of April durable goods orders in the U.S. will paint a lackluster picture due to weak manufacturing surveys and a significant slowdown in Boeing aircraft orders. Additionally, the Kansas City Fed Services Survey will be released later in the day. Insights from Federal Reserve’s Chris Waller’s neutral stance opening speech on rates, along with potentially hawkish comments on inflation and monetary policy, are expected.
ING does not anticipate significant changes in direction in dollar pairs today, suggesting that local factors will drive currency movements given a relatively quiet U.S. data schedule and the upcoming holiday. The firm maintains a bullish stance on USD/JPY, citing a focus on carry trade in markets and Japan’s low core CPI supporting conservative expectations for Bank of Japan rate hikes. The possibility of testing Japan’s tolerance for currency intervention may lead to a move towards the 158.0 level for USD/JPY in the near future.
Source: investing.com
