Interbank Market News Scan: Yen value against the dollar decreased while spreads tightened…

The Stats …

Currency pair 22 May 2023 23 May 2023 24 May 2023 25 May 2023 26 May 2023

BTC/USD 26820.8 26795.9 27217.6 27201.2 26276.4

EUR/USD 1.08061 1.08146 1.07862 1.07675 1.07283

GBP/USD 1.24444 1.2442 1.24145 1.23948 1.23407

USD/JPY 137.195 138.16 138.549 138.802 139.699

Source: OANDA

Analysis by FXStreet notes a number of factors that may have impacted the decline of the British pound against the U.S. dollar including fading banking sector concerns, renewed optimism over debt ceiling negotiations, a resurgence in demand for the US dollar, and hawkish sentiment on the part of members of the Board of Governors of the Federal Reserve System and a number of its district presidents.

In addition, FXStreet cited statistics from the UK’s Office of National Statistics showing an increase in the nation’s unemployment rate from 3.8% to 3.9%. Consensus estimates saw unemployment remaining at last quarter’s 3.8% print.

The Japanese yen also saw a decline last week against the US dollar. The USD/JPY climbed 1.8% between 22 May and 26 May 2023, according to data from OANDA. According to analysis by FXStreet, the increase in the USD/JPY was due in part to the market’s reaction to a strong US Personal Consumption Expenditures index. Rather than inflation falling to an annual rate of 3.9%, according to this index, annual inflation is running hotter at 4.4%.

Inflation is making the dollar more expensive for purchase by the yen.

Bitcoin enthusiasts saw a two percent decrease in the price of the cryptocurrency, but brokers saw spreads remain relatively unchanged during the week.

Meanwhile, the EUR/USD saw a decline of .007% while broker spreads remained unchanged. The key to the euro’s weakening versus the US dollar appeared related to the strong personal consumption expenditure index number released today.

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I am betting that the decline in the pound, euro, and yen will continue into next week especially after an agreement is reached on the US debt ceiling. A US Treasury short on cash will increase the supply of bonds on the market, driving down the price and increasing yields and interest rates on these instruments. Higher yields will increase demand for the dollar.

I am open to hearing what you think on where exchange rates are set to go in the short term.

Alton Drew

26 May 2023

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