Dollar Strengthens, Iran Risks and PCE Determined
The US dollar continued its rally on Thursday (May 28) after the US struck Iranian military targets for the second time this week, while Kuwait said it was responding to missile and drone threats. The Bloomberg Dollar Spot Index briefly rose as much as 0.3% to its highest level since April 8, although the initial boost subsided as oil prices fell and Treasury yields pared earlier losses.
In the bond market, the 10-year US Treasury yield rose about 1 basis point to 4.49%, after briefly touching 4.53% intraday. The market awaits the release of high-profile US data, including April's PCE (the Fed's favorite inflation indicator), personal spending, and jobless claims, which could potentially alter policy expectations and the dollar's direction.
Against the yen, the dollar's gains lost steam after the yen pared its losses. USD/JPY fell 0.1% to 159.38 after briefly touching 159.65. The market is also awaiting data from the Japanese Ministry of Finance on Friday to gauge how aggressively the authorities have intervened over the past month, while options suggest demand for protection against intervention risks briefly strengthened before easing.
In Europe, EUR/USD pared losses and traded around 0.1% lower at 1.1618, with reports of corporate demand near daily lows and month-end flows contributing. GBP/USD fell 0.2% to 1.3405, extending its decline for a third day, as sterling becomes increasingly sensitive to the dollar narrative and global geopolitics.
Looking ahead, the dollar's direction is likely to be determined by a combination of PCE data and Middle East headlines. If US inflation surprises again to the upside or geopolitical risks increase, the dollar is likely to remain supported; conversely, weakening oil prices and cooler inflation data could limit further gains. (Arl)*
Source: Newsmaker.id
