USD Gains on Rising Yields; Eurozone inflation at record highs
After the Memorial Day break in the US, the US dollar index (DXY) jumped back above 101.7, helped by further jumps in US Treasury yields, the yield on 10-year notes reaching 2.8%, while inflation in the euro zone reached an overall level. -record temps of 8.1% YoY in May, well above market forecast of 7.7%.
The US dollar welcomed recent remarks from Federal Reserve officials that revived expectations of Fed rate hikes, which had faded in recent weeks. Fed’s Christopher Waller said yesterday that he was in favor of raising rates by another 50 basis points for several meetings, or until inflation approaches the 2% target.
US bond yields also rose as inflation expectations rose again, as oil prices (WTI) climbed 2% on the day to $118 a barrel on Tuesday, the highest since March 9. March, after European leaders decided to ban 90% of Russian oil by the end of 2022, reigniting fears of a tightening global crude market.
EUR/USD fell 0.4% to 1.073 after hitting an intraday high of 1.0786 yesterday.
After May’s inflationary shocks in Germany, Spain and France, the Eurozone experienced record inflation in May 2022, fueled not only by further increases in energy prices (39.2% against 37.5% in April) but also by increases in services (3.5% against 3.3%).
The surge in core inflation (which excludes energy and food) to 3.8% year-on-year, against market estimates of 3.5%, is a sign that inflationary pressures are spreading as a wildfire in the entire consumer basket and constitute a major source of market. worry.
Chart of the day: Eurozone inflation hit record high in May
Eurozone inflation hit a new all-time high in May – Photo: Capital.com / Source: TradingviewGBP and NZD slide on inflation concerns
Sentiment towards high-beta currencies, such as the British pound (GBP) and New Zealand dollar (NZD), has weakened as Treasury yield rates rise and new inflation concerns emerge.
Cable (GBP/USD) erased past session gains, returning to $1.26 after hitting 1.266 yesterday. The Kiwi Dollar (NZD/USD) edged down 0.6% on the day to $0.651 after hitting 0.656 yesterday.
The Japanese yen (JPY) also weakened 0.3% on the day as US yields rose and after industrial production data in Japan contracted 1.3% in April, surprising investors. lower market expectations (-0.2%).
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Top Torques: Best Risers and Lowers Today – May 31, 2022
Major currencies: Today’s rises and falls, May 31, 2022, 11:30 UTC – Photo: Capital.comNorwegian krone bounces off oil, EM currencies weaken
The Norwegian krone (NOK) was the day’s best performer, rising 0.3% against the US dollar, propelled by further gains in Brent crude, which is on a nine-session winning streak and rose above $119 per barrel after Europe imposed an oil embargo that affects two-thirds of Russia’s maritime exports.
This event certainly validated expectations for increased Norwegian crude oil shipments to Europe, supporting the krone.
The resurgence of the dollar today is hurting emerging currencies. The South African Rand (ZAR) is down 0.7%, the Mexican Peso (MXN) 0.4% and the Korean Won 0.3%.
Forex Market Heatmap – May 31, 2022
Forex market heatmap May 30, 2022, 11:30 UTC – Photo: Capital.com
