Forex Today: Steadily cooling US labor market keep US Dollar on edge

Here is what you need to know on Friday, May 10:

The US Dollar (USD) recovers modestly during the Asian session on Friday. However, the near-term appeal is still uncertain as higher-than-projected Initial Jobless Claims (IJC) for the week ending May 3 indicated that the United States (US) labor market is struggling to bear the burden of Federal Reserve’s (Fed) restrictive policy framework.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rebounds slightly after tumbling to 105.00. The next move in the US Dollar will be guided by April’s US Inflation data, which will be published on Wednesday. The inflation data will provide meaningful cues about whether the Fed will start reducing interest rates from September. Till then, interest rate guidance from Fed speakers will drive movement in the US Dollar.

In the Asian trading hours, USD/JPY rose to 155.77 even though Japan’s annual Overall Household Spending declined at a slower pace of 1.2% against a contraction of 2.4% expected by investors. Though the decline in the households’ spending was slower than expected, weak consumer spending is unfavorable for the Bank of Japan’s (BoJ) intention to hike interest rates further.

EUR/USD holds gains near two-day high of 1.0780 as US Dollar comes under pressure. Traders have already priced in three rate cuts by the European Central Bank (ECB) this year.

GBP/USD holds’ Thursday’s gains slightly above 1.2500. The Cable covered BoE-led losses after a sharp fall in the US Dollar. The BoE kept borrowing rates steady at 5.25% as expected but its communication on the interest rate outlook was dovish. In the press conference, BoE Governor Andrew Bailey said the central bank could deliver more rate cuts than what market participants had anticipated. Out of the nine-members-led Monetary Policy Committee (MPC) team, BoE policymaker Swati Dhingra and Deputy Governor Dave Ramsden voted for a rate cut by 25 basis points (bps) to 5%.

Gold price looks set to close the week on a strong note. Spot prices rise to $2,355 amid firm speculation that the Fed will start reducing interest rates from the September meeting.

Gold price gains momentum despite hawkish Fedspeak

AUD/USD edges down during the Asian session but holds strength above the psychological support of 0.6000. The Aussie will be driven by China’s Consumer Price Index (CPI) data for April, which will be published over the weekend.

Australian Dollar hovers above a psychological level, US Consumer Sentiment awaited

(This story was corrected on May 10 at 06:20 GMT to say that USD/JPY rose to 155.77, not 155.66).