Washington (awp/afp) – The dollar gained ground on Friday, with no progress on the Middle East conflict after the meeting between Presidents Donald Trump and Xi Jinping, reigniting inflation fears.
By 6:20 p.m. GMT, the greenback was up 0.40% against the euro at 1.1623 dollars, and increased by 0.58% against the British pound at 1.3323 dollars.
“The U.S. dollar is ending the week on a high note” as “oil prices rise and global stock markets […] decline,” summarised analysts at Scotiabank.
Thursday’s hope was that the Trump-Xi meeting could lead to some positive headlines (including on Iran) that would cap the greenback and boost the risk sentiment, but “for now, it’s not enough,” notes Francesco Pesole of ING.
The American president simply mentioned encouraging comments from Xi Jinping, stating that China would not provide weapons to Tehran and could help reopen the Strait of Hormuz.
This status quo raises concerns of a generalized acceleration of inflation.
“The U.S. data released this week clearly showed that price pressures persist,” note the experts at Scotiabank.
Producer price index (PPI) inflation jumped in April in the United States by +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 the markets to anticipate a higher probability of a Fed rate hike this year,” observes Scotiabank analysts.
Monetary tightening would be supportive of the dollar.
At the same time, the pound continues to weaken due to the increasing maneuvers of potential rivals of Prime Minister Keir Starmer within the Labour Party.
Markets especially fear “the prospect of a major left turn that would annihilate growth and deepen an even larger deficit in British public finances,” summarizes Kathleen Brooks, analyst at XTB.
Already propelled by an uncertain global economic context due to the war, British government bond yields 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%.
(Fact Check: The article discusses the impact of the Trump-Xi meeting on the dollar, inflation fears, and implications for global markets)
(Check: The article seems neutral and factual in reporting the financial news on currency exchange rates and market trends)
