US Dollar rally continues ahead of key US data

The US Dollar (USD) continues to gather strength against its major rivals on Thursday and the US Dollar Index trades at its strongest level since mid-March above 104.00. In the second half of the day, the US Bureau of Economic Analysis will release the first revision to the first-quarter Gross Domestic Product (GDP) growth. The US economic docket will also feature weekly Initial Jobless Claims and Pending Home Sales data for April.

The risk-averse market environment amid the uncertainty surrounding the outcome of the US debt-limit negotiations helped the USD outperform its rivals mid-week. US House Speaker Kevin McCarthy reassured on Wednesday that the US would avoid a default but noted that they had still a difference over spending.

Hawkish comments from Fed Governor Christopher Waller, who said that he would not support stopping rate hikes unless there was clear evidence that inflation was moving down towards the 2% objective, provided an additional boost to the currency. In the late American session, the minutes of the Fed’s May policy meeting revealed that policymakers were split on the support for more interest rate increases but this publication failed to trigger a noticeable market reaction.

Early Thursday, US stock index futures trade mixed with the Dow Futures losing nearly 0.5% and the technology-heavy Nasdaq Futures adding more than 1%. Meanwhile, the benchmark 10-year US Treasury bond yield stays flat near 3.75% following Wednesday’s rally.

EUR/USD stays under persistent bearish pressure and trades at its lowest level in over two months below 1.0750 early Wednesday. Earlier in the day, the data from Germany revealed that the GDP contracted at an annualized rate of 0.5% in the first quarter, compared to the initial estimate of 0.1%.

Despite stronger-than-expected Consumer Price Index (CPI) figures, Pound Sterling failed to hold its ground against the USD and GBP/USD registered its lowest daily close since late March below 1.2400 on Wednesday. The pair stays relatively quiet early Thursday and consolidates its weekly losses slightly above 1.2350.

Fuelled by rising US T-bond yields, USD/JPY advanced toward 140.00 and reached its highest level since November. The pair stages a technical correction in the European morning and trades modestly lower on the day below 139.50.

Pressured by the broad USD strength and the decisive rebound seen in the benchmark 10-year US Treasury bond yield, Gold price suffered large losses on Wednesday. XAU/USD struggles to gain traction and trades at around $1,960 early Thursday.

Bitcoin fell more than 3% on Wednesday and continued to stretch lower in the Asian session on Thursday. After having dropped below $26,000 earlier, however, BTC/USD erased a portion of its daily losses and was last seen trading near $26,200. Similarly, Ethereum fell 3% on Wednesday and broke below $1,800.