• The British pound is holding on to gains at three months highs as dollar weakness persists.
  • Major US indices are poised to end the month near all-time highs amid persistent inflation concerns.
  • Oil prices are edging higher with the $70 a barrel level insight.
  • Bitcoin is trying to bounce back after a recent slump to the $33,000 level.

The British pound is holding firm against the dollar at three months highs. The bullish tone stems from a hawkish Bank of England, which has already hinted at a possible rate hike next year, buoyed by the ongoing economic recovery.

The GBP/USD pair continues to trade in a tight trading range of between 1.4140 and 1.4190.

GBP/USD chart

While the pair did start the week on a positive tone, the 1.4200 is emerging as a critical resistance level. A rally followed by a close above the 1.4219 level is needed if the pair continues edging higher. Strong economic recovery prospects are one of the catalysts that should continue to offer support to the cable.

Strong economic data in recent weeks has overshadowed inflation concerns and fears about new COVID-19 variants helping offer support to the sterling. Weakness in the US dollar over worries that the Federal Reserve could start tightening monetary policy has also worked in favor of the pound against the dollar.

Yuan vs. dollar

The Chinese yuan is another currency gaining ground against the dollar at the back of accelerated Chinese economic growth. The latest data showing that NBS Manufacturing PMI stabilized at 51, meeting expectations is the catalyst offering support to the yuan against the dollar.

USD/CNH chart

The USD/CNH pair has continued to edge lower amid dollar weakness and growing bets about Chinese economic growth. The initial indication that Chinese economic activity might be peaking should continue to fuel further slide in the USD/CNH pair.

US stocks closed higher the past week as investors reacted to better than expected data signaling economic recovery from the coronavirus pandemic. However, the gains were curtailed by concerns about inflation running at its highest annual rate in about 13 years.

US indices rally

The Dow Jones Industrial Average was up 64 points to 34,529 as the S&P 500 closed up 0.1% to 4,2014.11. Tech-heavy NASDAQ index was up 0.01% to 13,736 points. The Dow was up 1.9% for the month, while the S&P 500 was up 0.6%. While the NASDAQ did post a 2.1% weekly gain, it ended May 1.5% down from April levels.

NASDAQ 100 index

While all the major indices are poised to exit May near all-time highs, inflation concerns remain at all-time highs, with the PCE inflation rate at 13-year highs of 3.6%. It marks the highest level since 2008. The core price index is also up 3.1% in the year through April, marking the biggest gain since 1992.

Upbeat oil demand

Oil prices edged higher early Monday morning, helped by improving oil demand. Brent Crude was up 0.7% to $69.22, closing in at two-year highs above $70 a barrel. US West Texas Intermediate crude for July was at $66.87 a barrel.

Oil prices chart

Both Brent Crude and WTI are on course to register a second monthly gain buoyed by oil demand outstripping supply. ANZ analysts expect oil demand to outstrip supply by 650,000 barrels a day in Q2 and 950,000bpd in Q3 and Q4.

Bitcoin bounce back

Bitcoin was on the receiving end early Monday morning in the cryptocurrency market, slumping to lows of 34,116. The slump came at the backdrop of Bank of Japan Governor Haruhiko Kuroda becoming the latest to express criticism about the industry.

On the technical level, the $30,000 level is the immediate support level above which BTC/USD remains well supported for further upside action.

BTC/USD chart

The $40,000 level is the immediate resistance level below which BTC/USD remains bearish.

The flagship cryptocurrency has recouped some of the losses powering through the 36,000 level. However, Bitcoin remains extremely volatile, going by the unrest across the crypto market. The threat of stringent regulation from some of the biggest markets, such as China and Iran, also continues to weigh heavily on the broader crypto market.