Forex News Roundup for 25 May, 2023

• A sense of caution permeates the stock markets as the US debt ceiling issue hampers what could have been a predominantly bullish market.
• The NASDAQ 100 Index has shown significant recovery in recent hours and continues to display a largely optimistic outlook. Should a resolution to the debt ceiling problem materialise, it is highly probable that we will witness a robust surge in this particular index.
• The recently published UK CPI (inflation) data indicates a decline in annualised inflation from 10.1% to 8.7%, contrary to expectations of a more pronounced decrease to 8.2%. This milder-than-anticipated fall in inflation could be exerting a slight dampening effect on the Pound’s relative decline in the market today.
• The US Dollar is experiencing a notable ascent in the Forex market, deviating from its long-term trajectory. The prevailing market dynamics today primarily revolve around the weakness of the New Zealand Dollar and the strength of the US Dollar.
• Traders focusing on trends may find opportunities in long positions for the USD/JPY currency pair, while short positions in NZD/USD could also be enticing. The New Zealand Dollar remains under pressure after the unexpected announcement from the Reserve Bank of New Zealand (RBNZ) signalling that it has reached its terminal interest rate.
• The US Dollar strengthens as investors anticipate another 25 bps rate increase at the upcoming Federal Reserve meeting in June. This optimistic outlook persists, despite the recently released FOMC Meeting Minutes indicating an even split among FOMC members, with a slight inclination towards not raising rates in June.
• The market’s confidence in an imminent rate hike remains high, even as US politicians struggle to find a satisfactory resolution to the ongoing impasse over the US debt limit. This deadlock poses a potential risk to the country’s credit ratings, with Fitch, a ratings agency, placing the US AAA long-term foreign-currency issuer default rating on a negative watch.
• There has been a remarkable upward momentum in select soft commodities, with several of them breaking through to reach new highs and demonstrating strong, persistent trends. Among these, the Cocoa ETF (NIB) stands out as it soared on Friday, ultimately concluding the trading session at a level that marked a fresh five-year high.