GBPUSD renews weekly high as US Dollar drops ahead of US inflation, Retail Sales

Cautious optimism prevails in the market early Wednesday on the news from China, as well as due to Fed Chair Jerome Powell’s rejection of rate hike concerns. Even so, the anxiety ahead of the key US data and the Sino-American tension limits the momentum of late.

With this, the US Dollar Index (DXY) remains pressured at the lowest level in more than a week, down for the third consecutive day. The same joins European Central Bank (ECB) officials’ push-back of consecutive rate cuts after June to underpin the EURUSD run-up. That said, GBPUSD also benefits from the softer US Dollar while refreshing the weekly high, especially after the upbeat UK jobs report and hawkish Bank of England (BoE) comments.

Further, USDJPY prods a three-day winning streak at the highest level in a fortnight but lacks downside momentum whereas AUDUSD rises amid China clues, ignoring softer wage growth data at home. That said, NZDUSD jumps the most among the G10 currency pairs as optimism at the commodity front joins the market’s preparations for the Reserve Bank of New Zealand’s (RBNZ) hawkish halt. It should be noted that the USDCAD ignores downbeat Canada Wholesale Sales and a pullback in the Oil prices to impress sellers.

Gold price edges higher after reversing from 21-SMA the previous day whereas Crude Oil picks up bids to reverse Tuesday’s losses linked to OPEC’s unimpressive demand forecast.

BTCUSD and ETHUSD pick up bids to reverse the previous day’s losses on broad-based US Dollar weakness. However, growing fears about the denial of spot Ethereum ETF join the US SEC’s harsh stand against the major crypto players to test the market’s latest optimism.

Following are the latest moves of the key assets:

• WTI Crude oil prints mild gains to consolidate the previous day’s losses around $78.50 by the press time.
• Gold struggles to defend Tuesday’s recovery while making rounds to the $2,358-60 region of late.
• The USD Index drops to its lowest level in seven days to 104.90 at the latest.
• Wall Street closed on the positive side and the Asia-Pacific shares grind higher. Further, British and European shares also appear positive during the initial trading hour.
• BTCUSD and ETHUSD both reverse the previous day’s losses by posting mild gains near $62,000 and $2,900 as we write.

US Dollar prepares for US data amid absence of ultra-hawkish Fed concerns…

Despite witnessing strong US Producers Price Index (PPI) for April, the US Dollar Index (DXY) dropped to a multi-day low the previous day, down by the press time, as Fed Chairman Jerome Powell pushed back rate hike concerns while the downward revisions of the PPI’s previous readings. The policymaker, however, also said, “We did not expect this to be a smooth road, but these were higher than I think anybody expected. And so what that has told us is that we'll need to be patient and let restrictive policy do its work," which in turn tests the US Dollar bears ahead of today’s US Consumer Price Index (CPI) and Retail Sales for April.

It’s worth noting that news suggesting the Chinese government’s readiness to buy unsold houses to ease the oversupply in the real estate market allowed buyers of the commodities and Antipodeans to defend the previous day’s gains despite cautious mood.

Apart from the pre-data anxiety, US Treasury Secretary Janet Yellen’s defense of the fresh US tariffs on China and President Joe Biden’s criticism of the dragon nation also challenge the optimists early Wednesday.

Even so, AUDUSD and NZDUSD cheer the hopes of witnessing more money supply from their key customer, namely, whereas USDCAD holds lower grounds as Crude Oil picks up bids to reverse the previous day’s losses. That said, energy prices dropped the previous day despite a higher-than-expected draw in the weekly US oil inventories reported by the industry player American Petroleum Institute (API). The black gold’s weakness could be linked to China's woes and OPEC’s no change in demand-supply forecasts for 2024 and 2025 in the monthly report. The cartel also shifted the responsibility to the OPEC+ group from the next release onwards.

EURUSD grinds higher after some ECB policymakers cited challenges to the consecutive rate cuts after June. The Euro pair also cheered upbeat prints of the EU and German ZEW numbers to refresh the weekly top the previous day, grinding higher of late. On the same line, strong prints of the UK wage growth superseded the higher Unemployment Rate and Claimant Count Change, and downbeat Employment Change while helping the GBPUSD to remain firmer. The Cable pair also benefited from hawkish comments of the Bank of England (BoE) policymaker Huw Pill.

On the other hand, USDJPY lacks downside momentum despite pausing the three-day uptrend as market players appear less convinced by the hawkish bias about the Bank of Japan (BoJ). Further, Gold price also struggles to extend Tuesday’s rebound amid mixed catalysts from China, one of the key XAUUSD customers, as well as due to the US Dollar’s hesitance in declining further ahead of the data.

• Strong buy: USDCAD, USDJPY, US Dollar
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, EURUSD

All eyes on US CPI, Retail Sales…

Even if Fed Chair Jerome Powell turned down the odds of witnessing more rate hikes, the policymaker also highlighted the importance of the incoming data for future decision-making. That said, the recent increase in the US inflation has been a major challenge to the US central bank in confirming the rate cuts in 2024 even if market participants are expecting a move in September. Hence, a strong print of the US CPI, as well as firmer US Retail Sales, will allow the US Dollar to reverse the latest losses and exert downside pressure on the commodities, as well as Antipodeans, especially amid the US-China tensions.

On the contrary, downbeat or mixed US data won’t hesitate to help Gold, EURUSD, and GBPUSD pairs to cross the short-term key resistances and lure buyers.

May the trading luck be with you!