Dollar Rises on Fed Hawkishness, UK Gilt Yields Hit 2008 High, Oil Gains on Trump-Xi Deal

Weekly labor market data released yesterday showed initial jobless claims rising from 199,000 to 211,000, exceeding the 205,000 forecast, while the total number of Americans receiving unemployment benefits came in at 1.782 million — below the expected 1.790 million. The labor market is thus holding firm under pressure, increasing the likelihood that the Federal Reserve will keep rates elevated for longer or even move to raise them further. Kansas City Fed President Jeffrey Schmid stated that elevated inflation remains the key negative factor for the economy, even as the economy itself is showing notable resilience. He added that uncertainty persists amid ongoing geopolitical instability and that, while the US is now less vulnerable to global energy supply disruptions than in the past, high oil prices continue to erode household purchasing power and push up production costs.

Investors are also closely watching the outcome of the personal summit between President Donald Trump and Chinese President Xi Jinping. The two sides agreed to continue dialogue, though no consensus was reached on several key issues — particularly geopolitical ones. Nevertheless, Trump announced China's readiness to increase purchases of American crude oil and to sign a contract for 200 Boeing aircraft. In response, the White House has authorized Nvidia to sell H200 chips to major Chinese enterprises, a move that could provide a meaningful boost to the global technology sector.

Eurozone

The euro is weakening against the US dollar and the yen, while posting mixed performance against the pound.

Germany's Ministry of Economy stated today that the country's GDP — which grew by just 0.3% in the first quarter — will likely suffer significant damage from the fallout of the US–Iran confrontation in the coming period, with rising prices, supply chain disruptions, and broader uncertainty expected to weigh heavily on business and consumer sentiment. Meanwhile, the IFO Institute's April survey of residential construction company managers showed their confidence index falling from –19.3 points to –28.4 points — the lowest reading in four years.

United Kingdom

The pound is weakening against the US dollar and the yen, while showing mixed dynamics against the euro.

Political instability in the UK remains the primary focus for investors and forex traders. The ruling Labour Party suffered a defeat in local elections, after which more than 90 of its MPs called on Prime Minister Keir Starmer to resign — a demand he has refused. The most likely candidates to challenge his leadership are currently considered to be Wes Streeting, who has stepped down as Health Secretary, and Manchester Mayor Andy Burnham. Burnham had previously been ineligible to stand as Prime Minister due to not being a sitting MP, but yesterday's resignation of Makerfield MP Josh Simons opens the door for Burnham to contest the resulting by-election — a path that could significantly increase his chances of becoming the next British Prime Minister. Investors believe any new government would struggle to maintain fiscal discipline, likely leading to higher public spending, increased borrowing, and a growing debt burden. Against this backdrop, the yield on 10-year UK gilts has climbed to its highest level since July 2008, reaching 5.137%, while sterling continues to weaken.

Japan

The yen is weakening against the US dollar but strengthening against the pound and the euro.

April wholesale inflation data released today showed the Corporate Goods Price Index rising from 1.0% to 2.3% month-on-month — well above the 0.7% forecast — and accelerating from 2.9% to 4.9% year-on-year against an expected 3.0%, marking the fastest pace of increase in three years. The upward trend is being driven by higher fuel and chemical product costs and raises the probability of near-term monetary tightening by the Bank of Japan. A Reuters survey of leading economists on the central bank's likely next steps found that a majority expect officials to raise the key interest rate to 1.0% in June, with two further hikes anticipated in the following year.

Australia

The Australian dollar is weakening against the euro, yen, pound, and US dollar.

Resources Minister Madeleine King has announced that the government will not impose restrictions on natural gas distribution during the winter period, after suppliers assured authorities that reserves are sufficient to meet demand on the eastern coast. Last month, officials had been considering activating the Australian Domestic Gas Security Mechanism (ADGSM) in the third quarter, which would have required exporters to prioritize domestic consumers over export customers.

Oil

Oil prices have resumed their upward move today, driven by the outcome of the Trump–Xi summit. The US President stated that China will purchase more hydrocarbons from Texas, Louisiana, and Alaska — though Beijing has yet to officially confirm this. Trump also hinted at the possibility of lifting sanctions on companies that purchase and process Iranian oil, including major private refiner Hengli Petrochemical. Adding further upward pressure, investor concerns are growing that hostilities in the Middle East could resume once negotiations conclude, which would renew pressure on the global economy.