ING observed a moderate reinforcement of the US dollar against a backdrop of hawkish sentiments from the Federal Reserve and a cooling in global risk appetite.
This resurgence comes despite certain domestic indicators suggesting the opposite direction for the currency. The US markets are poised for a pause with the upcoming Memorial Day holiday, leading to a closure on Monday.
The past week in the US has not been marked by significant data releases, but Thursday's S&P Global (NYSE:SPGI) PMIs provided an unexpected boost, supporting the dollar's recovery. The composite PMI leaped to 54.4, positioning the US ahead of the eurozone and the UK, challenging the narrative of a harmonizing growth outlook between the regions.
Friday's focus is on the release of April's durable goods orders in the US, which is anticipated to be lackluster, reflecting subdued manufacturing surveys and a notable deceleration in Boeing (NYSE:BA) aircraft orders.
Additionally, the Kansas City Fed services survey will be released later in the day. Federal Reserve's Chris Waller is slated to deliver a keynote on the neutral rate, potentially offering insights into his recent hawkish comments on inflation and monetary policy.
ING does not foresee significant directional shifts in dollar pairings today, suggesting that domestic factors will drive currency movements amid a relatively calm US data schedule and the upcoming holiday.
The firm maintains a bullish stance on USD/JPY, citing a carry trade focus in the markets and the subdued core CPI in Japan, which supports conservative expectations for Bank of Japan rate hikes. With the possibility of testing Japan's tolerance for foreign exchange intervention, a move to 158.0 for USD/JPY is seen as likely in the near future.
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