Asian session review: the US dollar was almost unchanged against the major currencies

During today's Asian trading, the US dollar rose slightly against major currencies, continuing yesterday's increase, which was due to the publication of the Fed's quarterly Senior Loan Officer Opinion survey. The survey results showed that while credit conditions for U.S. businesses and households continued to tighten at the start of the year, it was likely due to the impact of the Fed's aggressive rate hikes rather than severe banking sector stress.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.05% to 101.42.

The Chinese yuan declined by 0.20% against the US dollar on the background of China's trade balance data. The General Administration of Customs reported that export growth slowed sharply in April (to 8.5% per annum from 14.8% per annum in March), and imports declined (-7.9% after -1.4% in March), signaling that the expected rebound in the economy after the lifting of Covid controls is unlikely to last long. As a result, the trade surplus rose to $90.21 billion from $88.19 billion in March. Economists had expected a reduction in the surplus to $71.6 billion. The latest official data indicate that China's economy recovered at the beginning of the year after the lifting of coronavirus restrictions. GDP grew by 4.5% in the first quarter after growing by 2.9% in the fourth quarter. The International Monetary Fund has predicted that China's economy will grow by 5.2% this year and by 4.5% in 2024.

The pound has consolidated against the US dollar, while investors are preparing for the meeting of the Bank of England. The Bank of England is expected to continue the policy tightening cycle at the May meeting. Although inflation in the UK is forecast to slow down over time, so far this slowdown has been disappointingly slow. The March consumer price index increased by 10.1% compared to last year, while the core CPI increased by 6.2%. Given that economic activity at the beginning of 2023 was also quite stable, including an improvement in sentiment in the polls and likely GDP growth, there is every reason to expect that the Bank of England will raise rates again this week. Although this may be the last rate hike in the current cycle, depending on how quickly inflation slows down and whether economic growth also slows down, experts note that the risks are clearly leaning towards further policy tightening.