Dollar Steady Amid Middle East Tensions and Global Data
The dollar index (DXY) was relatively flat at 99.13 on Thursday (May 21), after previously touching a six-week high amid concerns that a US-Iran peace deal remains elusive. Media reports that Iran's Supreme Leader, Ayatollah Mojtaba Khamenei, had ordered weapons-grade uranium to remain domestically briefly boosted the dollar, before unofficial news of a draft agreement reversed the gains.
The dollar's gains were driven by safe-haven hopes, high Treasury yields, and projections of relatively strong US growth compared to other economies exposed to high energy costs. Weak PMI data in Europe, the UK, and Japan highlighted the divergence in economic performance, boosting demand for the dollar. Eurozone economic activity shrank at its worst pace in more than two and a half years in May, while the UK and Japan recorded similar slowdowns in the manufacturing and services sectors.
The EUR/USD pair fell 0.03% to $1.1624, while GBP/USD edged up 0.07% to $1.3441. USD/JPY weakened 0.01% to 158.92, approaching the 160 level that triggered the Bank of Japan's last market intervention. BOJ Board member Junko Koeda stated that interest rates need to be raised "at an appropriate pace" as price pressures from the Middle East conflict have the potential to push core inflation above the 2% target, supporting the possibility of a rate hike in June.
On the domestic data front, US initial jobless claims fell, confirming the resilience of the labor market and giving the Federal Reserve room to focus on rising inflation.
Variables to monitor: developments in US-Iran negotiations, Fed and BOJ policies, Treasury yields, and global energy cost dynamics.
Source: Newsmaker.id
