Ella 
The US dollar has extended its rally for the sixth consecutive day following remarks by Federal Reserve Chair Jerome Powell, indicating concerns over the pace of inflation moderation. Powell, characterizing the economy as “quite strong,” emphasized a persistent lack of substantial progress in inflation metrics, suggesting the Fed may maintain current interest rates for an extended period should higher inflation persist.
Concurrently, US Treasury yields experienced a notable uptick for the second consecutive day across the yield curve. The benchmark 10-year yield surged above 4.6%, marking its highest level this year, while the 2-year yield hovered a mere basis points below 5%.
Amidst fragile sentiment, European stock indices extended losses, with Wall Street also trading slightly lower. Consequently, the Australian dollar faced significant pressure, emerging as the weakest major currency amid mild risk aversion, recording a third consecutive day of decline and touching 64 cents for the first time since mid-November.
Bank of Canada Governor Macklem offered insights on inflation dynamics, expressing confidence in its trajectory following the release of softer Consumer Price Index (CPI) figures. Macklem’s remarks bolstered expectations of a potential rate cut in June, echoing his earlier acknowledgment that such action was “possible.” Notably, core CPI aligned with the Bank of Canada’s 2% target, while median CPI moderated to 2.8% year-on-year, and trimmed mean CPI stood at 3.1%. If trimmed mean CPI aligns within the Bank of Canada’s target band of 1-3% in the upcoming inflation report, prospects of a rate cut in June could be all but confirmed.
In the United Kingdom, mixed wage data surfaced, with wage growth excluding bonuses slowing to 6% to 6.1%, while earnings including bonuses exceeded forecasts at 5.6%. Job claims also fell below expectations at 10.9k, compared to the forecasted 17.2k. These figures, while not indicative of deflationary trends, aided GBP/USD in resisting the broader strength of the US dollar, maintaining its position above 1.24. Market participants eagerly await additional UK data scheduled for release later today, anticipating further insights into the economic landscape.
