The US Dollar Index (DXY) climbed to fresh two-week highs, reaching 98.80–98.82, following the release of resilient US Retail Sales data, which showed a 0.5% month-over-month increase in April and a 4.9% annual rise, surpassing expectations for 3.3% growth [1][2]. This robust consumer spending, despite elevated borrowing costs and high gasoline prices, bolstered the Greenback across major currencies, with the USD posting its strongest gains against the British Pound (up 0.93%) and notable advances versus the Euro (up 0.34%) and Japanese Yen (up 0.28%) [1].
The market also reacted to political developments, as Stephen Miran submitted his resignation from the Federal Reserve Board of Governors, paving the way for Kevin Warsh to become the new Fed Chair [1]. Money markets now expect the Federal Reserve to hold rates unchanged at the next meeting, which will be the first under Warsh's leadership [2]. Comments from Fed officials highlighted inflation as the most pressing risk, with Kansas City Fed's Jeffrey Schmid noting the economy's resilience and Cleveland Fed's Beth Hammack emphasizing the importance of central bank independence [2].
The US-China summit between President Donald Trump and President Xi Jinping further improved risk sentiment. Trump announced that Beijing agreed to purchase 200 Boeing jets and clear sales of NVIDIA H200 chips to 10 Chinese firms, while Xi warned that disagreements over Taiwan could escalate tensions [2]. Negotiations between US and Chinese trade teams in South Korea reportedly achieved 'balanced and positive outcomes' [2].
In the wake of these developments, Gold (XAU/USD) retreated by 0.25% to $4,678, as the stronger US Dollar and improved risk appetite reduced haven demand [2]. The Producer Price Index (PPI) rose 6% year-over-year and the Consumer Price Index (CPI) reached 3.8%, both moving further away from the Federal Reserve’s 2% target and contributing to skepticism about rate cuts in 2026 [2]. US equities pushed toward new all-time highs, reflecting the improved market sentiment [2].
Currency pairs saw significant moves: EUR/USD fell toward 1.1670, GBP/USD dropped to a one-month low near 1.3400, and USD/JPY climbed to a two-week high near 158.30, supported by widening US-Japan yield differentials and reduced safe-haven demand for the Yen [1]. AUD/USD also declined toward 0.7220 despite positive US-China developments [1].
CONCLUSION
Stronger-than-expected US retail sales and rising yields propelled the US Dollar to multi-week highs, pressuring Gold and major currencies. The US-China summit and resilient US economic data further boosted risk appetite, with markets now expecting the Federal Reserve to maintain rates at its next meeting. Overall, the market response was positive for the US Dollar and equities, while safe-haven assets like Gold faced headwinds.