The dollar index clocked solid gains on Thursday, heading toward the close a touch below session highs of 104.31 on a mix of haven buying due to the still-unsettled U.S. debt ceiling negotiations and hot U.S. economic data that has all but erased dovish Fed rate cut expectation for year-end.
Tight initial jobless claims data and upbeat GDP and core PCE data raised Fed rate expectations with the front-end of the fed funds strip pricing a 91% chance for a Fed hike in July.
Year-end rate cut expectation have dwindled to just a touch above 60% for a single 25bp easing move in December.
Early in May December cut expectations were for more than 80bp.
The ongoing debt ceiling kerfuffle is thought be nearing resolution, with U.S. Representative Kevin Hern saying a deal was likely by Friday afternoon, though front-end T-Bill rates remain elevated, albeit off Wednesday’s highs above 7%.
EUR/USD fell 0.2% to 1.0726, with rates-driven dollar strength the main force.
The dollar's haven bid remained intact as credit agencies put the U.S.
sovereign rating on watch for a possible downgrade.
USD/JPY broke above key Fib resistance at 139.58, rallied to a 139.96 high and was set to end the NorAm session +0.33% at 139.91.
BOJ Governor Kazuo Ueda commented on tinkering with the YCC program, shifting focus to shorter maturities, which did little to stem the rising USD/JPY tide.
The pair is running into resistance ahead of 140, tipped option interest and natural big-figure resistance, though those may just be speed bumps as widening U.S.-Japan rate differentials should keep the current USD/JPY bid intact.
GBP/USD trickled lower, heading toward the close down 0.33% at 1.2327 just above the day’s 7-week low at 1.2308.
Weak UK CBI data in the aftermath of Wednesday’s UK CPI miss weighing on the pound as traders looked past rising UK rates and focused on fading UK economic data, both of which may put the UK into a long and deep recession.
Higher rates were no tonic for gold bugs.
XAU/USD fell 0.75% to $1,942, a looming debt ceiling deal prodding speculators to lighten gold hedges and take advantage of higher yields.
Bitcoin was flat at $26.4k, finding support at its lower 30-day Bolli by $25.7k.
BTC finds key support at $25.3k the 50% Fib of $19.6-$31k, a close below the 50% Fib opens the way for a run lower to the 200-DMA at $22.7k.
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