United States
The greenback has recouped most of yesterday’s losses following constructive developments regarding the Iran situation, with the US announcing it would not proceed with a planned military strike. This de-escalation has been interpreted as a positive signal for conflict resolution, though sentiment remains mixed across global markets. The Dollar Index has stabilized after the initial volatility, reflecting renewed safe-haven demand and a recalibration of geopolitical risk premiums.
Benchmark 10-year Treasury yields are mostly firmer, with the 10-year yield climbing nearly two basis points to poke above 4.60%. This yield movement reflects both the de-escalation narrative and ongoing Fed policy expectations. Governor Waller is scheduled to speak early today, while Philadelphia Fed President Paulson will address markets during the Asia Pacific session, ahead of tomorrow’s FOMC minutes release. These communications will be closely monitored for any signals regarding the Fed’s stance on future policy adjustments.
On the data front, US pending home sales for April are due today, with forecasters expecting a modest gain following mixed signals in the existing home sales data. Existing home sales edged up in April by 0.2% after a revised 2.9% decline in March (originally reported as 3.6%), while pending home sales rose by 1.5% in March. The housing market remains a key indicator of economic resilience amid elevated interest rates.
The broader economic backdrop remains relatively quiet this week, though the G7 finance and central bankers’ meeting concludes today amid significant trade tensions. The administration’s threat to increase tariffs on European Union vehicles if a trade agreement is not approved by July 4 has created considerable friction, while discussions regarding Greenland and the unilateral waiver on Russian oil sanctions have further complicated diplomatic relations. These geopolitical crosscurrents add another layer of uncertainty to the outlook for both monetary policy and international trade dynamics.
Eurozone
The euro snapped a five-day losing streak yesterday after initial weakness extended losses through $1.1610. The single currency recovered sharply to $1.1660 in late North American dealings following President Trump’s announcement that he had agreed to call off today’s strike on Iran at the request of Gulf allies. However, the recovery lacked sustained conviction, and the euro retreated to $1.1615 in European trading this morning. Last Friday’s high was recorded near $1.1675, establishing a key reference point for near-term resistance.
Technical support for EUR/USD is identified in the $1.1580–$1.1600 area, representing a critical zone for bulls to defend. Options representing almost 2.5 billion euros struck at $1.1650 expire today, potentially providing a technical anchor point as traders adjust positioning ahead of the expiration. The currency pair remains sensitive to both the geopolitical narrative surrounding the Iran situation and broader eurozone economic data.
On the economic front, the eurozone’s March trade balance attracted limited market interest today. The trade surplus of 3.5 billion euros compared unfavorably to the 26 billion euro surplus recorded in March 2025 and 14.1 billion in March 2024. More significantly, the Q1 2026 trade surplus of approximately 21 billion euros represents a dramatic contraction from Q1 2025’s 56.2 billion euros—a decline of more than 60%. This deterioration reflects the impact of US tariffs reducing demand for eurozone exports while imports from China have risen approximately 12% over the past year. These structural trade headwinds represent a persistent challenge for the eurozone economy and could weigh on the ECB’s outlook for growth and inflation dynamics.
United Kingdom
Sterling rose for the first time in six sessions yesterday, providing a much-needed respite for cable after a prolonged downtrend. The currency tested support near $1.33 before recovering to $1.3450, posting what appeared to be a bullish outside day as it traded on both sides of last Friday’s range and settled above that high. The roughly 0.75% gain represented the largest single-day advance in two-and-a-half weeks, suggesting a potential shift in momentum.
Sterling’s recovery allowed the currency to overshoot the 38.2% Fibonacci retracement level of last week’s slide, which was calculated near $1.3435. This morning, cable is trading in the upper end of yesterday’s range, straddling the $1.3400 area. Near-term resistance is now identified around $1.3420, though the currency remains vulnerable to fresh selling pressure given the disappointing labor market data released yesterday.
The UK labor market report delivered a significant disappointment that has complicated the Bank of England’s policy calculus. Payrolled employees fell by 100,000 in April, substantially worse than the Bloomberg median forecast of a 10,000 decline and the revised March figure of a 28,000 loss (initially reported as an 11,000 decline). The claimant count rose by 26.5k in April following a revised March increase of 4.9k (originally reported as 26.8k). The unemployment rate, measured by the International Labour Organization, ticked up to 5.0% from 4.9%, adding to concerns about labor market softening.
Average weekly earnings, including bonus payments, rose 4.1% on a three-month year-over-year basis, down from a revised 3.9% in February. Private sector earnings, excluding bonuses, decelerated to 3.0% from 3.2%, suggesting underlying wage growth momentum may be moderating. These mixed signals—weaker employment but still-elevated wage growth—create a challenging environment for the BOE as it weighs inflation risks against growth concerns.
Tomorrow, the UK will report April consumer price inflation. Due to favorable base effects, last April’s CPI jumped 1.2%, and this elevated comparison will drop out of the 12-month calculation, which should allow headline and core year-over-year rates to slip. Despite some hawkish commentary from BOE Governor Greene, the swaps market is discounting little more than a 20% probability of a rate hike at next month’s meeting, rising to almost 80% by the end of July. This pricing reflects market expectations for further labor market deterioration before any tightening is warranted.
China
The offshore yuan has demonstrated impressive strength, appreciating in 12 of the past 13 sessions with the sole exception of last Friday. The greenback pierced CNH6.82 for the first time in eight sessions before being driven to the session low near CNH6.7975 in the North American morning yesterday. USD/CNH is currently trading firmly, just slightly below CNH6.81 in European turnover, reflecting sustained yuan strength.
The People’s Bank of China set the dollar’s reference rate at CNY6.8375, marking a new multiyear low. The previous low was recorded last Thursday at CNY6.8401, indicating a deliberate pattern of daily fixing adjustments that guide the offshore market. This sequence of increasingly strong fixings suggests the PBOC is guiding the yuan stronger, potentially in response to capital flow dynamics or broader policy objectives regarding currency stability and capital account management.
The persistent strength in the Chinese currency reflects both external demand factors and domestic policy considerations. With imports from China rising approximately 12% over the past year despite US tariff pressures, the yuan’s appreciation may reflect underlying economic resilience and potential capital inflows. However, the PBOC’s active management of the daily fix suggests policymakers are carefully calibrating the pace of appreciation to avoid disruptive moves that could undermine export competitiveness.
Japan
The dollar rose for the sixth consecutive session against the Japanese yen yesterday, matching the longest rally of the year. USD/JPY edged higher this morning despite stronger-than-expected Japanese Q1 GDP data, suggesting the uptrend has genuine momentum. The yen had fallen for seven of eight sessions when the BOJ apparently intervened on April 30, though it is worth noting that the dollar had fallen for three consecutive weeks through April 17 before recovering slightly less than 0.5% in the week prior to the intervention.
The dollar reached slightly above JPY159.15 in European turnover this morning, trading within a narrow range of slightly less than half a yen. Options representing nearly $635 million at the JPY159 strike expire today, potentially providing technical support at that level. The intervention risk remains a key consideration for USD/JPY traders, particularly given the BOJ’s stated concern about excessive yen weakness and its impact on import price inflation.
Japan reported robust Q1 2026 economic growth of 2.1% at an annualized pace, a significant acceleration from Q4 2025’s downwardly revised 0.8% (originally reported as 1.3%). However, the composition of growth reveals concerning underlying trends. Consumption rose by 0.3%, slightly better than expected, though Q4 2025 consumption was cut to flat from 0.3%. Government spending slowed meaningfully to 0.4% from 1.5%, while private investment decelerated to 1.1% from 5.6%. Inventories shaved 0.1% off GDP growth, compared to a 0.4% drag in Q4 2025. Net exports contributed 0.3% after a flat contribution in Q4 2025.
The 10-year Japanese Government Bond yield jumped 5.5 basis points following the GDP data, reflecting market expectations that the stronger growth might embolden the BOJ toward further policy normalization. The swaps market is now pricing in almost a 78% probability of a rate hike next month, up substantially from approximately 65% at the end of April. This dramatic repricing reflects growing conviction that the BOJ will continue its gradual exit from ultra-loose monetary policy. Japan is scheduled to sell 20-year bonds tomorrow, and the market will be closely monitoring demand given the recent backup in long-end yields.
Tokyo CPI and other Japanese economic data remain important for gauging underlying inflation momentum and supporting the case for BOJ tightening. The unemployment rate and industrial production figures will also be closely watched as indicators of labor market tightness and manufacturing sector health, both of which could influence the BOJ’s policy trajectory.
Canada
The Canadian dollar stabilized yesterday after a pronounced downtrend that saw the loonie decline in 10 of the past 11 sessions coming into this week. The greenback edged up slightly yesterday, trading quietly inside last Friday’s range of approximately CAD1.3715–CAD1.3765. However, the Canadian dollar is on its back foot again this morning, with the greenback edging above last week’s high. Near-term resistance is identified in the CAD1.3800–1.3815 area, representing a critical technical level for USD/CAD bulls.
On the data front, another large increase in Canada’s consumer price inflation is expected today. The Bloomberg survey median forecast calls for a 0.7% month-over-month increase in April, translating to a 3.1% year-over-year pace. The underlying core measures are expected to show little change, remaining in the 2.2%–2.3% range. These readings will be crucial for the Bank of Canada’s policy deliberations.
The Bank of Canada is scheduled to meet on June 10, and the swaps market is currently pricing in very little probability of a policy change at that meeting. However, a rate hike is nearly fully discounted by the end of Q3 2026, suggesting markets expect the BOC to eventually resume tightening if inflation remains sticky. The trajectory of Canadian CPI in coming months will be instrumental in determining whether the BOC maintains its current pause or moves forward with additional rate increases.
Australia
The Australian dollar initially extended last week’s decline, falling to approximately $0.7120—a new low for the month. It subsequently rebounded and set the session high at almost $0.7185 in the North American morning yesterday. However, sellers reasserted control and took the currency slightly through $0.7110 this morning. A break below the psychologically important $0.7100 level could target $0.7055 as the next downside objective.
Options representing nearly A$1 billion struck between $0.7135 and $0.7150 roll off today, and the expiration of this substantial block of contracts could influence price action as traders adjust positions. The technical setup suggests the aussie remains vulnerable to further downside pressure, particularly if broader risk sentiment deteriorates or if the Reserve Bank of Australia signals a more dovish stance than currently anticipated.
The Reserve Bank of Australia’s meeting record from earlier this month, when it hiked rates for the third consecutive time this year, reinforced the market’s conviction that while the tightening cycle is not finished, the central bank will hold steady at next month’s meeting. The futures market has discounted one hike and approximately a 33% probability of another hike in the second half of 2026. This pricing reflects expectations that the RBA will take a measured approach, pausing to assess the cumulative impact of three consecutive rate increases before determining whether further tightening is warranted. Private credit dynamics and broader financial stability considerations may also influence the RBA’s policy path.
Emerging Markets
The dollar jumped almost 0.7% against the Mexican peso at the end of last week and consolidated in quiet turnover yesterday. USD/MXN recorded an inside session and found support near MXN17.2570. The greenback is consolidating inside yesterday’s range this morning, though the price action appears constructive for dollar bulls. The high recorded at the end of last week was around MXN17.4030, establishing a key resistance level for the pair.
The Indian rupee has declined for the eighth consecutive session, hitting a new record low as capital outflows and broad dollar strength weigh on the currency. Some reports suggest the Reserve Bank of India may have intervened around INR96.34 in an effort to support the rupee. The dollar has reached almost INR96.6165, reflecting sustained selling pressure on the Indian currency. The roughly 1.7% decline this month brings the year-to-date rupee loss to 6.9%, representing a significant depreciation that raises concerns about import price inflation and external vulnerability. It is also noteworthy that the Indonesian rupiah has fallen to record lows, suggesting broader emerging market currency weakness is not isolated to India.
Global Markets
Equities are displaying mixed performance today, with regional divergences reflecting different growth outlooks and policy expectations. In Japan, the Nikkei declined despite the stronger-than-expected GDP data, while the Topix rose, suggesting sector rotation rather than broad market weakness. China and Hong Kong markets posted gains, but a sharp liquidation in the technology sector weighed on regional indices. Taiwan’s Taiex fell 1.75%, while South Korea’s Kospi suffered a more pronounced 3.25% decline, reflecting heightened volatility in Asian technology stocks. Europe’s Stoxx 600 is up almost 0.7%, and when combined with yesterday’s gains, the index has nearly recouped the approximately 1.5% loss incurred before the weekend. US index futures are trading lower, suggesting the pullback from last week’s record highs is not yet complete and may continue when North American trading begins.
Benchmark 10-year yields are mostly firmer across major economies. Most European yields have moved roughly one basis point higher, while the 10-year Treasury yield has climbed nearly two basis points to poke above 4.60%. The 10-year JGB yield jumped 5.5 basis points following the stronger GDP data, reflecting market expectations for BOJ tightening. These yield movements reflect a complex interplay of de-escalation relief, growth data surprises, and shifting monetary policy expectations across major central banks.
Gold initially sold through $4,500 yesterday for the first time since late March, a significant technical breakdown. The precious metal recovered and recorded session highs slightly above $4,584, demonstrating underlying bid support. Gold consolidated mostly above $4,535 in the North American afternoon before coming back offered after stalling near $4,589. The metal could re-challenge the $4,500 area, with that level now representing a critical support zone. The volatility in gold reflects shifting risk sentiment and changing expectations for real interest rates as geopolitical tensions ease but growth dynamics remain uncertain.
Silver traded at a seven-session low slightly below $74 yesterday before rebounding sharply to poke above $78. The white metal traded mostly between $76 and $77.25 in the North American afternoon and reached almost $79 this morning before being turned back to slightly below $75.50. The significant intraday swings in silver reflect both its role as an industrial metal sensitive to growth expectations and its safe-haven characteristics during periods of geopolitical tension.
July crude oil reached new contract highs during the Asia Pacific session yesterday, approaching $104.35 before being sold sharply to the session low near $98.60 in early North American turnover. The contract recovered back to around $103.65 before consolidating above $102. July crude is currently trading between approximately $102 and $104, near the middle of the range ahead of the US open. The July WTI contract held above $102, while July Brent remained above $109, reflecting ongoing geopolitical risk premiums despite the Iran de-escalation news.
The US extended the waiver of sanctions on those who purchase Russian oil already in tankers at sea for an additional 30 days. This decision reverses previous warnings that sanctions would not resume and represents a significant policy shift. Some analysts suggest that without these waivers, China would become the most important buyer of discounted Russian crude oil. The continuation of the waiver provides some relief to global oil markets and reflects complex geopolitical calculations regarding energy security, sanctions enforcement, and relationships with key allies. On Polymarket, there is slightly less than a 33% probability that the Strait of Hormuz will open by the end of next month, underscoring lingering concerns about potential disruptions to critical energy transit routes.
