## United States
Following a dollar rebound in North America, there has been minimal sustained buying of the greenback today as it weakens against most G10 currencies. The U.S. Dollar Index (DXY) saw a near-low of 100.25 in Europe yesterday, before rising to nearly 101.15 in North America, indicating a potential bullish hammer candlestick. Today, the DXY retraced, settling around 100.60 after facing resistance near 101.00. A range of U.S. data is expected today, encompassing Fed surveys (New York and Philadelphia), reports on retail sales and industrial production, Producer Price Index (PPI) data, and March business inventories. The Chicago Fed’s real-time spending model suggests a potential 0.6% decline in retail sales excluding autos, contrasting with Bloomberg’s forecast of a 0.3% rise. The Atlanta Fed GDP Now predicts a 2.3% Q2 growth, to be updated following today’s data. Economists have revised down potential U.S. recession risks and raised Chinese growth forecasts due to tariff postponements. Fed Chair Powell is set to discuss the Fed’s policy framework review without addressing previously sidestepped topics.
## Eurozone
The euro reached a three-day high near $1.1265 during yesterday’s European session but was subsequently sold off back to $1.1165 in the North American session. This high corresponded with the 61.8% retracement level of the dip from last week’s high (~$1.1380) and a 38.2% retracement of a larger movement since the yearly high set on April 21 (~$1.1575). The euro maintained its low from yesterday and recovered to approximately $1.1230 today. Meanwhile, the eurozone revised its Q1 GDP growth down to 0.3% from an earlier estimate of 0.4%. A second straight increase in aggregate industrial production exceeded 1% for the first time since August-September 2022, soaring 2.6% and beating median expectations of a 2% rise.
## United Kingdom
Sterling experienced a five-day high of near $1.3360 before the North American session yesterday, but trended lower and fell to around $1.3255. Today, it fluctuates between $1.3260 and $1.3305. Q1 GDP expanded by 0.7%, surpassing both market and Bank of England expectations. Consumption improved sequentially, total business investment showed unexpected strength rising by 5.9% despite a previous decline, and government spending surprisingly fell by 0.5%. Industrial output in March fell by 0.7%, with manufacturing down by 0.8%, although services output rose 0.4% and construction improved by 0.5%. The trade deficit narrowed, with and without the precious metals trade included.
## China
Yesterday, for the first time in four sessions, the dollar rose against the offshore yuan, climbing from a six-month low (~CNH7.1790) to about CNH7.2160. Today, the currency consolidates in the higher range from yesterday, trading between about CNH7.2030 and CNH7.2155. A technical target lies in the CNH7.2230-50 range. The yuan has appreciated about 0.85% against the dollar in May, positioning it as the third best-performing currency in the region, following the Taiwanese dollar (~5.7%) and the South Korean won (~1.5%). The People’s Bank of China set a higher dollar reference rate at CNY7.1963 versus CNY7.1956, the third increase in 13 sessions.
## Japan
The dollar navigated nearly a two-yen range yesterday, ultimately settling above the midpoint near JPY146.80. It briefly broke through Monday’s low (~JPY145.70) before climbing above JPY147 early in the New York afternoon, closing near JPY146.75 and has remained below this level today, retreating to JPY145.50. A movement above JPY146.30 is necessary to steady the yen’s tone. Japan is set to deliver its first Q1 GDP estimate on Friday, with expectations of a modest contraction possibly driven by public consumption, private investment, and net exports. Potential offsets include consumption and inventories. Concurrently, Nissan announced the closure of seven factories globally (out of 17) with a layoff of 20,000 employees—11,000 more than previously anticipated after disappointing earnings.
## Canada
On a pullback yesterday, the U.S. dollar remained above Monday’s low, just below CAD1.3900, and rebounded to CAD1.3985. It trades firmly within the higher range from yesterday, constrained to a CAD1.3960-90 range. The greenback needs to break past the CAD1.4015-20 zone, which capped it earlier in the week, to bolster technical momentum. High-frequency data for Canada today includes manufacturing and wholesale sales and existing home sales, which typically do not influence the Canadian dollar or interest rates significantly. Tomorrow’s March portfolio flow report may garner some interest, with Canada reporting net inflows of around C$1.45 billion in the first two months, compared to $9.2 billion in the first two months of 2024 and $11.1 billion in January-February 2023.
## Australia
The Australian dollar surged past $0.6500 for a short time yesterday, stopping beneath last week’s six-month peak near $0.6515. It declined to nearly $0.6420 by the North American afternoon and, despite stronger employment data, fell slightly through yesterday’s lows to $0.6415. Breaking the $0.6400-10 range could re-target this week’s lows between $0.6355-60. An employment increase totaling 89,000 surpassed forecasts by more than triple, following a 36,400 rise in March, with 59,500 of those positions being full-time. For five consecutive months, the unemployment rate has hovered between 4.1% and 4.2%, an impressive figure against the rising participation rate, now at a three-month high of 67.1%. Nonetheless, the market anticipates that the Reserve Bank of Australia will cut rates in the forthcoming week, following up with two additional cuts by year’s end.
## Mexico
Mexico’s peso has shown resilience, reaching a new high for the year amid weak economic signals and inflation barely within the target range, setting the stage for Banxico to deliver its third consecutive half-point interest rate cut later today. The dollar retreated to nearly MXN19.30 in North American trading yesterday before rebounding to around MXN19.39. It has been trading within a narrow margin of approximately MXN19.36-MXN19.40, barely entering the lower Bollinger Band (~MXN19.3725). A 50 basis point cut would reduce the overnight target rate to 8.50%. However, the central bank is expected to signal a more gradual easing pace while maintaining restrictive policy. The swaps market estimates a year-end rate in the 7.25%-7.50% range.
