USDJPY renews two-week high despite upbeat Japan GDP

Markets turn cautiously optimistic on early Wednesday as US leaders manage to strike a positive development about debt limit extension. Adding strength to the firmer sentiment could be China’s readiness for more investment. However, strong US data and hawkish comments from the Fed policymakers joined a lack of details on how the US policymakers will avoid default before the early June deadline prods the optimists.

With this, the US Dollar manages to defend the previous day’s recovery even as Treasury bond yields struggle after a three-day winning streak. As a result, the USDJPY fails to justify upbeat Japan Q1 GDP and sluggish bond coupons while refreshing the highest levels in a fortnight.

That said, GBPUSD drops the most among the G10 currency pairs while extending losses made after Tuesday’s downbeat UK jobs report and upbeat US data. Further, Gold price struggle for clear directions whereas crude oil remains pressured for the second consecutive day amid the market’s indecision and firmer US Dollar.

Cryptocurrencies also bear the burden of the firmer USD, especially when institutional investors exit a few large positions amid fears of more regulations and recession.

Following are the latest moves of the key assets:

• Brent oil drops half a percent to $74.50 while extending the previous day’s losses at the latest.
• Gold price licks its wounds around $1,990 at the two-week low.
• USD Index refreshes six-week high around 102.95 by the press time.
• Wall Street closed with mild losses but the Asia-Pacific shares grind lower. However, equities in Europe and the UK print remain directionless as we write.
• BTCUSD and ETHUSD remain pressured around $26,800 and $1,810 by the press time.

US policymakers push back default fears

A quick meeting between US President Joe Biden and House Speaker Kevin McCarthy was enough to tame the market’s concerns that the US will default on its debt payment during the first week of June. However, there weren’t many details and some of the policymakers fail to back the optimism by sticking to their demand in return for extending the debt ceiling, which in turn challenged the optimism afterward.

Due to the mildly positive sentiment, the risk barometer USDJPY pair rises for the fifth consecutive day while renewing the highest levels in two weeks. It’s worth observing that the first readings of Japan’s Q1 GDP offered a positive surprise but failed to impress JPY bulls amid dovish BoJ concerns and risk-on mood. Elsewhere, GBPUSD suffers from the downbeat UK data and the BoE policymakers’ inability to convince the markets after the last week’s dovish hike.

It’s worth noting that the Fed policymakers’ defense of higher rates and mentioning of the inflation woes join the shortened Asia-Pacific visit of US President Joe Biden to weigh on the equities in the zone, as well as challenge the shares in Europe and the UK.

BTCUSD and ETHUSD struggle to extend the early-week optimism amid market doubt about further run-up and constant uncertainty over the looming US regulatory framework.

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

Nothing major on the calendar

Having witnessed an interesting start of the day, markets are likely to witness inaction amid a lack of major data/events. Even so, the chatters about central banks and US default may entertain intraday traders. That said, the US housing data and the final readings of the EU inflation numbers are scheduled for release during the day.

May the trading luck be with you!