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What’s happening: The US dollar gained on Friday as investors assessed the latest economic reports.
What happened: Data showed an increase in import prices, with consumer sentiment remaining weak amid ongoing tariff concerns.
Despite recording gains for the fourth week, the US dollar is still down around 3% since the announcement of tariffs by President Donald Trump on April 2.
Why it matters: The US dollar started last week on an upbeat note after the US and China announced plans to temporarily lower tariffs for 90 days, easing growth concerns. The US agreed to slash tariffs to 30% from 145% on imports from China, while Beijing said it would lower duties to 10% from 125% on goods imported from the US.
However, the US dollar traded lower for most of the week following tepid economic reports. compared to market estimates of 53.4, The Labor Department reported that US import prices rose 0.1% in April, following a 0.4% decline in the previous month as higher cost of capital goods offset lower energy prices. Analysts were expecting a 0.4% decline in import prices. US exports price rose 0.1% in April, versus market expectations of a 0.5% decline.
The University of Michigan showed its consumer sentiment index fell to 50.8 in May, from 52.2 in the previous month. The figure came in lower than market estimates of 53.4. The 12-month inflation expectations of consumers increased for the sixth month in a row to 7.3% in May, from 6.5% in the previous month. The figure reached its highest mark since November 1981.
Following these reports, investors pared back their projections of interest rate cuts by the Federal Reserve this year, lending support to the US dollar.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose past the 101 mark on Friday, ending the week higher by more than 0.6%.
The EUR/USD forex pair fell to 1.1165 on Friday, down around 0.8% in the week. The GBP/USD pair settled lower at 1.3282.
What to watch: Investors will continue monitoring global trade tensions and talks between the US and other countries to pull back tariffs.
Comments from Fed members regarding upcoming rate cuts will also remain in focus.
Context: Stock markets in the Asia Pacific region closed mostly lower on Friday as investors monitored the latest GDP report from Japan.
Details: Market sentiment improved after the US and China decided to pause tariff hikes for 90 days.
Data released on Friday showed that Japan’s economy shrank by 0.2% in the first quarter. This marked the first GDP contraction in a year and was worse than the 0.1% decline projected by economists.
The latest economic data reinforced concerns around the impact of a slowdown in the global economy due to tariffs imposed by US President Donald Trump.
Japan’s Nikkei 225 fell 0.005% to close at 37,753.72 on Friday, while the broader Topix Index gained 0.05%. Technology stocks moved lower, while some non-tech stocks lent some support to the overall market.
China’s Shanghai Composite Index declined 0.40% to settle at 3,367.46, while Hong Kong’s Hang Seng Index fell 0.46% to settle at 23,345.05 on Friday. Australia’s benchmark S&P/ASX 200 gained 0.56% to settle at 8,343.7.
What to watch: Investors await the release of economic data on Japan’s balance of trade on Wednesday, the Jibun Bank composite PMI on Thursday and inflation data on Friday. Japan’s trade surplus, which widened to ¥544.1 billion in March from ¥349.9 billion in the year-ago month, is expected to narrow to ¥227.1 billion in April.
Analysts expect the au Jibun Bank Japan composite PMI to decline to 50.4 in May, from 51.2 in April, while the annual inflation rate is projected to accelerate to 3.7% in April, from 3.6% in the previous month.
Other Markets: European indices closed higher on Friday, with FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.59%, 0.30%, 0.42% and 0.42%, respectively.
Ukraine reported that Russia had launched its biggest drone attack since the start of full-scale invasion. The news sent the RUB/USD pair lower in forex trading this morning.
China’s new home prices dipped 4.0% year-over-year in April, following a 4.5% decline in the previous month. The region’s home prices declining for the 22nd straight month exerted pressure on the CNY/USD forex pair.
New Zealand’s producer input prices rose by 2.9% in the first quarter, following a 0.9% decline in the previous quarter, which sent the NZD/USD pair higher in forex trading this morning.
Sri Lanka’s manufacturing PMI tumbled to 40.1 in April, from 63.9 in the previous month. The region’s manufacturing activity contracting to the lowest level in two years exerted pressure on the LKR/USD forex pair.
The Eurozone’s trade surplus widened to a record high of €36.8 billion in March, from €22.8 billion in the year-ago period, which sent the EUR/USD pair higher in forex trading this morning.
Spain’s balance of trade (1200 UAE Time), Eurozone’s inflation rate (1300 UAE Time), 3-year bond auction (1345 UAE Time), 6-year bond auction (1345 UAE Time) and 9-year bond auction (1345 UAE Time), Germany’s 3-month Bubill auction (1330 UAE Time), 9-month Bubill auction (1330 UAE Time), Brazil’s IBC-BR economic activity (1600 UAE Time), France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time), as well as US CB leading index (1800 UAE Time), 3-month bill auction (1930 UAE Time) and 6-month bill auction (1930 UAE Time).
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