Washington (awp/afp) – The dollar is gaining ground on Friday, with no progress on the Middle East war after the meeting between Presidents Donald Trump and Xi Jinping reigniting inflation fears.
By 6:20 pm GMT, the greenback was up 0.40% against the euro, at 1.1623 dollars per euro, and up 0.58% against the British pound, at 1.3323 dollars per pound.
“The American dollar is finishing the week on an uptrend” as “oil prices rise and global stock markets (…) decline,” summarized analysts at Scotiabank.
Hope on Thursday was that the Trump-Xi meeting could lead to some positive headlines (including on Iran) that would have capped the greenback and boosted the risk sentiment, but “for now, it’s too little,” notes Francesco Pesole of ING.
The American president only mentioned encouraging remarks from Xi Jinping, ensuring that China would not provide arms to Tehran and that it could help reopen the Strait of Hormuz.
This status quo raises fears of a generalized acceleration of inflation.
“American data released this week clearly show that price pressures persist,” say Scotiabank experts.
Producer price inflation (PPI) surged in April in the United States, up 6% year-on-year compared to 4.3% in March. The Consumer Price Index (CPI) reached 3.8% year-on-year last month, the highest in over three years.
“This leads markets to anticipate a higher probability of a Fed rate hike this year,” observe Scotiabank analysts.
A monetary tightening would be supportive of the dollar.
Meanwhile, the pound continues to weaken with increasing manoeuvres by potential rivals of Prime Minister Keir Starmer within the Labour Party.
Markets fear particularly “the prospect of a major leftward shift that would hamper growth and deepen a larger deficit in British public finances,” summarized Kathleen Brooks, analyst at XTB.
Already propelled by an uncertain global economic context due to the war, British government bond interest rates rose on Friday.
The 10-year rate soared to 5.180%, a level not seen since the 2008 financial crisis, while the 30-year rate reached a peak since 1998, at 5.858%.
Friday Rates ๐ Thursday Rates 6:20 pm GMT ๐ 10:00 pm GMT EUR/USD ๐ 1.1623 ๐ 1.1669 EUR/JPY ๐ 184.55 ๐ 184.80 EUR/CHF ๐ 0.9146 ๐ 0.9145 EUR/GBP ๐ 0.8724 ๐ 0.8707 USD/JPY ๐ 158.73 ๐ 158.37 USD/CHF ๐ 0.7870 ๐ 0.7837 GBP/USD ๐ 1.3323 ๐ 1.3403
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