Forexlive Americas FX news wrap: US dollar stays on the defensive | Forexlive

Markets:

• S&P 500 flat at 6091
• US 10-year yields down 1 bps to 4.28%
• WTI crude oil up 86-cents to $65.23
• Gold up $9 to $3332
• NZD leads, JPY lags

Wednesday was a chance for markets to digest a hectic two weeks in the Middle East and it meant only small moves in bonds and stocks. In contrast, there was some life in FX as the US dollar continued to sell off. The new home sales report was very soft and was a small catalyst behind the decline. Increasingly though the market is shifting the narrative on rate cuts and pricing more in with year-end now at -63 bps, up from 49 bps last week.

The big change is a drop in the price of oil and even though there was a small bounce today, it’s back at levels that will help to cool inflation. Comments from Powell and other Fed officials on Wednesday offered no changes around the ‘wait-and-see’ narrative but evidently the market is beginning to see a softer economy, or at least lower inflation.

A big test of that will come in the day ahead with the May PCE report slated to be released.

On the day the US dollar slid, particularly in North American trade. That helped the euro to the best levels since October 2021 and led to another sold gain for the pound, which also touched the best level since 2021. The Aussie and kiwi also made solid gains for the fourth day, though they remain within recent ranges.

The yen was a laggard despite some hawkish comments from a BOJ official earlier. That may simply be a case of back-and-fill after huge moves on Monday/Tuesday.