The US Dollar Index (DXY) fell to about 98.10 on Thursday after US first-quarter growth undershot forecasts and Japan carried out its first foreign exchange intervention in almost two years.
US GDP rose at an annualised 2% in Q1 versus 2.3% expected. Initial jobless claims fell to 189K for the week ending 25 April, against 215K expected, the lowest in nearly 60 years.
Yen Intervention Shakes Markets
USD/JPY dropped towards 156.50 after Japan’s Nikkei reported official action to buy yen and sell dollars after a break above 160. Senior officials had warned about possible action before the report.
EUR/USD moved up to around 1.1730 after the ECB held its deposit rate at 2%. Eurozone releases covered CPI, GDP and HICP, with generally firm outcomes.
GBP/USD climbed to near 1.3610 after the BoE kept rates at 3.75% on an 8–1 vote. AUD/USD neared 0.7200, supported by Chinese data and a weaker dollar.
Gold edged towards $4,620, while WTI slipped to about $102 per barrel after touching $107. Due Friday: Australia Q1 PPI, Switzerland March retail sales, Canada April manufacturing PMI, and US ISM manufacturing PMI.
Key Trade And Risk Implications
We are now seeing the US Dollar under significant pressure from two different directions. The softer-than-expected GDP growth is leading many to bet that the Federal Reserve’s hands will be tied, even as the labor market shows incredible strength with jobless claims at a multi-decade low. This division in the data suggests that derivatives pricing in future rate cuts may be getting ahead of themselves, creating potential opportunities.
The Japanese intervention in the currency market is the most critical event, and we must watch it closely. Similar to the interventions we saw back in the spring of 2024, the first move is rarely the last, which means we can expect a period of high volatility in the USD/JPY pair. This environment is ideal for options traders looking to profit from large price swings, as implied volatility is likely to remain elevated.
With the European Central Bank and Bank of England holding rates steady, the policy divergence with a potentially more cautious Fed could continue to favor the Euro and Pound. The pound sterling is trading at a three-month high against the dollar, and recent data shows UK wage growth running at an annualized rate of over 5.5%, suggesting inflationary pressures may keep the BoE from cutting rates soon. This strengthens the case for staying long on GBP/USD futures or call options.
The Australian Dollar is benefiting from both the weak US Dollar and signs of a resilient Chinese economy, which is a major consumer of Australian exports. China’s recent Caixin Manufacturing PMI, which has stayed in expansionary territory above 50 for six consecutive months, supports this positive outlook for commodity currencies. Gold is also climbing due to the weaker dollar, but at over $4,600 an ounce, its direction will be heavily influenced by shifts in real yields.
Oil prices saw a small dip, but the weaker dollar should provide a floor by making crude cheaper for buyers using other currencies. Global demand remains a key factor, with recent EIA reports showing a consistent draw on US crude inventories, signaling that consumption is still robust. We should continue to monitor OPEC+ discipline, which, much like it did throughout 2024 and 2025, has been effective at preventing significant price collapses.
