Boosted by progress in the US-UK trade agreement that uplifted market confidence in the American economy, the US dollar rose significantly across the board on May 8, with the dollar index climbing 1.03%, closing at 100.639 on the New York currency market – showcasing a strong bullish momentum for the dollar.
Previously, on the 7th, President Trump announced the main contents of the US-UK trade agreement, stating that both sides would continue to negotiate details in the coming weeks. This news sparked a positive market reaction, leading to the dollar's ascent, especially after weeks of uncertainty. Standard Chartered's analyst Steve Englander noted that the US-UK trade agreement could serve as a blueprint for other countries hoping to reach agreements with the US. The market will closely watch the disclosure of the agreement's contents and its applicability to other nations.
The dollar's rise was further supported by the latest data from the US Department of Labor, showing that first-time claims for unemployment benefits were 228,000, below the market expectation of 232,000 and down from the previous week's 241,000. This further strengthened market confidence in the US economic outlook. Analyst Vladimir Zernov pointed out that the dollar index is attempting to break through the 100.20-100.40 resistance range; if successful, the next target range would be between 101.40-101.60.
In global currency markets, the strong performance of the dollar led to a widespread decline in other major currencies. The euro to dollar exchange rate fell from the previous day's 1.1328 to 1.1225, while the pound to dollar rate decreased from 1.3317 to 1.3251. Meanwhile, the dollar also gained against other major currencies such as the yen, Swiss franc, and the Canadian dollar, reflecting increased demand for the dollar.
Notably, the Bank of England announced on the same day a 25 basis point interest rate cut. This policy move was in line with market expectations but also caused a rapid decline in the pound, providing further support for the dollar.
From a technical perspective, the dollar index's rise broke through recent key resistance levels, indicating that bullish sentiment for the dollar might continue. In the coming weeks, further details in the US-UK trade agreement will be crucial in influencing the dollar's trajectory. The market widely believes that the dollar index could maintain its strength in the short term, especially amidst ongoing global economic uncertainties.
