The U.S. dollar extended its decline
🇺🇸 U.S. Dollar Under Pressure
Continued Weakness: The U.S. dollar extended its decline, reaching near two-week lows. This downturn is attributed to escalating concerns over U.S. fiscal stability, following the House's narrow approval of President Trump's $3.8 trillion tax and spending bill, which includes a significant $4 trillion debt ceiling increase.
Credit Rating Downgrade: Moody's downgraded the U.S. credit rating from Aaa to Aa1, citing rising federal debt and persistent fiscal deficits now amounting to $36 trillion. This downgrade led to a broad sell-off in government bonds and further pressured the dollar.
🇪🇺 Euro and 🇬🇧 British Pound Strengthen Euro Gains: The euro appreciated against the dollar, supported by stronger-than-expected economic data from Germany, where Q1 GDP doubled previous estimates.
Sterling Surges: The British pound reached a three-year high, buoyed by robust retail sales that outstripped forecasts, indicating resilient consumer spending in the UK.
🇯🇵 Japanese Yen and Inflation Dynamics Yen Stability: The Japanese yen remained relatively stable, with market speculation about a potential Bank of Japan rate hike growing as Japan's inflation accelerated.
Inflation Concerns: Rising inflation in Japan is pushing yields higher and challenging the Bank of Japan, which is grappling with low bond demand.
🇮🇳 Indian Rupee's Volatility Rupee's Best Day: The Indian rupee recorded its strongest single-day gain in over two years, closing at 85.2125 against the U.S. dollar, up 0.9%. This surge was attributed to increasing concerns over U.S. fiscal stability and trade tariffs, which weakened the dollar and spurred a rally in emerging market currencies.
Forex Reserves Fluctuate: India's foreign exchange reserves dropped by $4.888 billion, bringing the total to $685.729 billion for the week ending May 16, 2025.
🌐 Global Market Sentiment Market Stabilization: Global markets showed signs of stabilization after a volatile week, with slight rebounds in stocks, the U.S. dollar, and bond prices. However, political and fiscal uncertainties, especially in the U.S., continue to complicate market projections.
Commodity Prices: Oil prices dropped due to potential OPEC+ supply hikes, while gold and silver prices consolidated as trade developments eased demand for safe-haven assets.