Summary: Although the sell-off was not strong, a new round of dollar selling occurred again on Wednesday (May 21); meanwhile, U.S. government bond yields remained high, keeping investors vigilant as they monitored the latest developments in U.S. trade agreements and worried about the health of the U.S. fiscal situation.
FX168 Financial News (Asia-Pacific) reported that although the sell-off was not strong, a new round of dollar selling occurred again on Wednesday (May 21); meanwhile, U.S. government bond yields remained high, keeping investors vigilant as they monitored the latest developments in U.S. trade agreements and worried about the health of the U.S. fiscal situation.
In this context, safe-haven currencies such as the yen and Swiss franc have once again become the main beneficiaries, with the euro also strengthening, and all three currencies against the dollar reaching two-week highs, while U.S. government bond yields continued to rise during the Asian session.
Generally, rising government bond yields support the dollar, especially against the yen, but this correlation has weakened over the past month as U.S. President Donald Trump's unpredictability in trade has shaken global markets and undermined investor confidence in U.S. assets.
During the European trading session, the market focus will shift to the annual report of retailer Marks & Spencer. The company faced a costly cyberattack a month ago. According to analysts, the attack may have cost this 141-year-old company over £60 million (approximately $81 million) in profits and forced it to suspend online order services. Wednesday's financial report will reveal more details about this incident.
In addition, investors will closely watch the release of the UK inflation data for April, which may influence the Bank of England's monetary policy direction. Previously, the strong performance of UK GDP data for the first quarter raised further concerns about cost pressures.
The Bank of England cut the benchmark interest rate by 25 basis points on May 8, and the market expects another 25 basis point cut at the next meeting in June.
A survey by Reuters of economists shows that due to the rise in regulated prices of household utility costs, the UK consumer price index (CPI) for April is expected to rise by 3.3% year-on-year, up from 2.6% in March. Another Reuters survey indicates that due to unexpectedly strong economic growth in the first quarter, economists expect the UK's economic growth this year to be slightly higher than forecasted a month ago.
In Japan, long-term government bonds showed little improvement on Wednesday. The yields reached a new high in the previous trading day due to poor results from a bond auction.
The significant sell-off of government bonds poses a challenge for the Bank of Japan. The bank is trying to reduce the scale of bond purchases and gradually restore normal monetary policy. However, the rise in long-term borrowing costs has also sounded the alarm for Japan, which has a high level of debt.
Key dynamics that may affect the market on Wednesday include:
Economic event: UK inflation data for April
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