During today's Asian trading, the US dollar consolidated against major currencies, remaining near the weekly high reached yesterday amid the publication of the minutes of the Fed's May meeting.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.04% to 104.89. Yesterday, the index rose by 0.25% against the background of the "hawkish" minutes of the last Fed meeting. While Fed Chairman Jerome Powell repeatedly stated that the Fed's next move "will not be a rate hike," some members of the board felt that the Fed should leave no stone unturned and not hesitate to raise rates if necessary. Overall, the minutes reflected concerns that inflation may not decline as quickly as expected. Consequently, expectations for the first interest rate cut shifted from September to November. According to the CME FedWatch Tool, markets see a 4.2% probability of a 25 basis point rate cut at the Fed meeting in June, a 18% probability of a rate cut in July, and a 59.8% probability of monetary policy easing in September.
The New Zealand dollar rose by 0.25% against the US dollar, continuing yesterday's increase caused by the results of the RBNZ meeting. The currency was supported by favorable New Zealand data, which showed that retail sales increased by 0.5% QoQ in the 1st quarter, partially offsetting a 1.9% QoQ drop in the 4th quarter. Economists had expected a 0.3% QoQ decline in sales. On a yearly basis, sales were down 2.4% after sinking 4.1% in the previous three months.
The pound rose 0.1% against the US dollar, while investors continued to analyze yesterday's CPI data and prepared for the publication of the PMI indices for May. Recent trends of a gradual slowdown in inflation, combined with an improvement in sentiment, should force Bank of England policymakers to wait until August before proceeding with a 25 basis point rate cut. Meanwhile, the PMI indices will provide additional information on how the mood has changed this year. The PMI indices have increased in recent months, which is consistent with an improvement in the growth prospects of the UK economy. According to forecasts, the manufacturing PMI rose to 49.4 in May from 49.1 in April, and the services PMI fell to 54.7 from 55.0.