US Dollar extends rebound ahead of PCE inflation data

The US Dollar (USD) continues to gather strength on the last trading day of April after having managed to record small gains against its major rivals on Thursday. First quarter Gross Domestic Product (GDP) data from the Eurozone and Germany will be watched closely by market participants ahead of April inflation figures from Germany. Later in the session, the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation, will be featured in the US economic docket alongside the Employment Cost Index for the first quarter.

The US Bureau of Economic Analysis (BEA) reported on Thursday that the US economy expanded at an annualized rate of 1.1% in the first quarter of 2023. This reading followed the 2.6% growth recorded in the last quarter of 2022 and came in worse than the market expectation for an expansion of 2%. Nevertheless, the USD held resilient against its rivals as the underlying details of the report showed healthy consumer activity and strong inflation components. With Wall Street’s main indexes rallying after the opening bell, however, the US Dollar Index (DXY) erased a portion of its gains. Early Friday, the DXY has regained its traction and started to push higher toward 102.00.

During the Asian trading hours, the data from Japan showed that the Unemployment Rate climbed to 2.8% in March from 2.6% in February, compared to the market expectation of 2.5%. Additionally, Tokyo Consumer Price Index rose to 3.5% in April from 3.3%, surpassing analysts’ estimate of 2.6% by a wide margin. Finally, the Bank of Japan (BoJ) announced that it left its policy settings unchanged as widely anticipated. The BoJ maintained the band around its 10-year JGB yield target at up and down 0.5% each while reiterating that it will take additional easing steps without hesitation as needed while striving for market stability. The BoJ’s dovish tone provided a boost to USD/JPY and the pair was last seen rising more than 1% on the day near 135.50.

After having declined slightly below 1.1000 in the early American session on Thursday, EUR/USD staged a rebound and closed the day virtually unchanged. The pair continues to trade in a tight range below 1.1050 early Friday.

GBP/USD registered small gains on Thursday and continued to push higher toward 1.2500 in the Asian session before losing its traction. The pair was last seen trading flat on the day at around 1.2480.

For the third straight trading day on Thursday, Gold failed to reclaim $2,000. With the benchmark 10-year US Treasury bond yield stabilizing above 3.5% following the two-day rebound, XAU/USD stays on the back foot and trades below $1,990 early Friday.

Bitcoin benefited from the risk-positive atmosphere on Thursday and gained nearly 3%. BTC/USD trades in a tight range near $29,500 in the European morning. Ethereum rose 2% on Thursday and climbed above $1,900 before going into a consolidation phase slightly above that level early Friday.

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