United States
The US dollar extended its gains against most Group of Ten currencies through the European session but faced selling pressure as North American trading commenced, with the greenback set to open lower against most major pairs with the notable exception of the Japanese yen. The broad dollar index reflects a mixed picture, with strength in some quarters offset by profit-taking in others as traders reassess positioning ahead of key economic data.
The data calendar this week remains relatively light on the US side. The May New York Federal Reserve’s service survey is expected to deliver little more than headline risk to markets. The manufacturing survey released at the end of last week softened to 7.3 from the prior reading of 11.0, signaling a deceleration in factory activity. Services were already underperforming in April, posting a negative 14.0 reading, suggesting broad-based weakness in the services sector that warrants close monitoring.
The March TIC (Treasury International Capital) data is scheduled for release toward the end of the session and deserves particular attention given prevailing narratives about foreign capital flows. Contrary to the widespread belief that foreign investors are retreating from US equities and bonds, the TIC data revealed that foreign investors purchased a net $1.41 trillion of US paper assets in 2025, representing a meaningful increase from $1.22 trillion in 2024 and substantially higher than the $840 billion recorded in 2023. It is important to note that this series exhibits considerable volatility, with every quarter last year experiencing at least one month of net liquidation. In the first quarter of 2026, January recorded a net outflow, but this was more than offset by the robust $184.50 billion net inflow recorded in February, demonstrating the resilience of foreign demand for US assets.
The US Treasury yield complex has begun the week with a firmer bias. The 10-year US Treasury yield is trading almost a basis point firmer near 4.60%, while the 30-year Treasury yield has edged higher to 5.13%. The end of last week saw the 10-year yield soar to its highest level in more than a year, with an 18 basis point increase marking the second-largest daily move in the G10 after Japan’s 20 basis point surge in the 10-year Japan Government Bond yield.
Eurozone
The euro experienced significant selling pressure, with the currency trading below $1.1620 during the European morning before the weekend and spending most of the North American session below $1.1640. The weekly decline of approximately 1.4% represents the largest weekly loss in two months, with the euro falling every session throughout last week. The currency made new weekly lows in late dealings ahead of the weekend, settling below the lower Bollinger Band and extending losses to slightly below $1.1610 in the Asia Pacific session before recovering to reach $1.1645 in Europe. If this session high is not already in place, it appears to be very close to the eventual high.
Technical support levels warrant close attention for traders monitoring EUR/USD. The next significant technical area of support is identified in the $1.1580–$1.1600 band. There are substantial option expiries to monitor at multiple levels. Traders should note 3.75 billion euros in options expiring at $1.1600 today, while nearly 1.3 billion euros expire at $1.1650. Tomorrow, an additional 2.0 billion euros of options expire at $1.1650, suggesting potential price anchoring around these levels as expiration approaches.
The euro’s weakness reflects broader concerns about eurozone economic momentum and the European Central Bank’s policy trajectory. European benchmark yields are mostly trading a little firmer, with the exception of the 10-year Gilt yield, which is off 2 basis points. The underlying economic backdrop continues to weigh on sentiment toward the single currency.
United Kingdom
Sterling has been subject to significant headwinds both from the recovering US dollar and from domestic political drama, as the Labour Party navigates internal turbulence despite having led the country to a strong electoral victory just two years ago. The British pound fell every day last week, mirroring the weakness seen in the yen and euro. Sterling’s decline of approximately 2.2% last week broke a five-week rally and marked the largest weekly loss since November 2024.
Cable (GBP/USD) reached $1.3315 before the weekend and settled below the lower Bollinger Band for the second consecutive session. The currency edged a little closer to $1.33 today before rebounding to almost $1.3385. The lower Bollinger Band is currently positioned near $1.3365, while the pre-weekend high was slightly above $1.3400, a level that may prove sufficient to cap further upside in today’s trading. Technical traders should watch these levels closely as potential resistance points.
The 10-year Gilt yield bucked the broader trend of rising yields, trading off 2 basis points as investors reassess the Bank of England’s policy stance and the UK economic outlook. The political uncertainty surrounding the leadership of the Labour government adds an additional layer of complexity to sterling positioning.
Canada
The Canadian dollar was the best-performing G10 currency against the US dollar last week in relative terms, yet its 0.55% decline was still sufficient to push it to its lowest level in a month. The loonie has demonstrated particular weakness, with the US dollar reaching slightly through CAD1.3765 before the weekend, overshooting the 50% retracement of its losses since the March 31 high near CAD1.3965. The greenback has held below the pre-weekend high and has returned to around CAD1.3735 in current trading.
The Canadian dollar has fallen for the past eight consecutive sessions, demonstrating a persistent downtrend that warrants attention from traders with exposure to this currency pair. The US dollar settled a little above the upper Bollinger Band, currently positioned near CAD1.3760 today. Historical precedent suggests that when the greenback trades above the upper Bollinger Band, as it did in January and March, it has typically been associated with significant highs in the currency pair. Initial support for the loonie is seen near CAD1.37.
It is worth noting that Canadian markets are closed today in observance of Victoria Day, which may result in lighter trading volumes and potentially wider spreads in USD/CAD trading. Traders should adjust their expectations for liquidity accordingly.
Australia
The Australian dollar’s upside momentum has been stalling despite reaching a new three-year high on May 6 near $0.7280. The broad gains in the US dollar proved too much for the aussie to overcome, and the currency broke down sharply before the weekend. The AUD fell to $0.7140, marking the lowest level in 10 days. Follow-through selling pressure pushed the Australian dollar to a new low for the month today, declining to near $0.7120. The aussie caught a bid that lifted it back to almost $0.7170, though a marginal new high appears possible, the $0.7180 area may prove sufficient to cap further appreciation.
Australia has taken significant action on the foreign investment front, ordering the largest shareholders in a critical minerals company to liquidate their stakes due to national security considerations. Of the six largest owners, five are registered in China or Hong Kong, while one is registered in the British Virgin Islands. These companies have been given two weeks to divest their holdings. The six investors collectively own slightly more than 25% of the company. The Australian government’s effort to reduce foreign ownership of the company originated in 2024, demonstrating a sustained policy commitment to protecting strategic national assets.
China
The People’s Bank of China appears willing to accept a stronger yuan, yet the greenback’s broader strength provides an opportune backdrop for consolidation in USD/CNH and USD/CNY. The US dollar reached CNH6.8165 before the weekend, marking its best level since May 6 and positioning slightly ahead of the 20-day moving average. The dollar’s rise before the weekend snapped an 11-session losing streak that had characterized trading in the preceding period. The dollar reached CNH6.8215 today before pulling back to almost CNH6.7975. Technical analysis suggests the dollar can appreciate toward CNH6.85 without inflicting significant technical damage to the structure.
The PBOC set the dollar’s official fix at CNY6.8435, compared to CNY6.8415 before the weekend and a multi-year low of CNY6.8401 recorded last Thursday. This adjustment reflects the central bank’s calibrated approach to managing the currency.
China reported disappointing April real sector data earlier today, with the economy growing by 1.3% quarter-over-quarter in the first quarter of 2026, translating to a 5.0% year-over-year pace. The second quarter began poorly, with both retail sales and industrial production decelerating. Retail sales rose by just 0.2% year-over-year after rising 1.7% in March, signaling a sharp slowdown in consumer demand. Industrial output rose 4.1% year-over-year, down significantly from 5.7% in March, indicating weakness in manufacturing activity.
Fixed asset investment dynamics have been mixed. After falling, perhaps due to the anti-involution campaign targeting over-investment in the final four months of 2025, fixed asset investment appeared to stabilize in March but fell 1.6% in the year-to-date year-over-year measure after rising 1.7% in March. Despite years of policy efforts to stabilize the sector, the Chinese property market remains a significant drag on overall economic growth. House prices continue to fall, property investment is contracting, and residential property sales are running almost 16% below last year’s sales through April, underscoring the persistent challenges in this critical sector.
Japan
The dollar has recorded a bullish outside up day last Thursday, trading on both sides of Wednesday’s range and settling above its high. Follow-through buying materialized Friday, though market participants recognize that continued strength is tempting material intervention from Japanese officials. The dollar closed above the 20-day moving average for the second consecutive session before the weekend and surpassed the 61.8% retracement of the intervention-spurred losses that characterized the April period.
The dollar rose for the past five sessions against the Japanese yen and reached JPY158.85 before the weekend. The gains have been extended today to almost JPY159.10, marking the dollar’s best level since the Bank of Japan reportedly intervened on April 30. The market is clearly testing Japanese officials’ resolve on intervention, and traders should remain alert to the possibility of BOJ action to support the yen at these elevated levels. Options for $4.7 billion at JPY159 expire today, which may provide some technical support or resistance depending on dealer positioning.
Japan’s Prime Minister Takaichi has reconsidered her initial reluctance and has endorsed a supplemental budget to help households and businesses cope with the commodity shock that has driven up import costs. This policy development weighs on supply concerns for Japanese Government Bonds, as additional fiscal spending may necessitate increased issuance. While the 10-year JGB yield edged up to 2.71%, the long end of the curve demonstrated more significant movement, with the 30-year and 40-year yields rising 6–9 basis points. The 10-year JGB yield soared to its highest level in more than a year at the end of last week, with a 20 basis point increase marking the largest daily move in the G10.
Japan is scheduled to report first quarter 2026 GDP first thing tomorrow. With less of a drag coming from inventories and a small contribution from net exports, the Japanese economy is expected to have expanded by about 0.4% after 0.3% growth in the fourth quarter of 2025. The annualized pace is projected to rise to 1.6% from 1.3%. Consumption and business spending are expected to slow, which could temper enthusiasm for further BOJ tightening. The GDP deflator may moderate to around 3.1% from 3.4%, according to the median forecasts in Bloomberg’s survey.
Emerging Markets
The dollar forged a base against the Mexican peso around MXN17.16. After coiling for most of last week, the greenback sprang higher ahead of the weekend, trading a little above MXN17.40, the dollar’s best level since May 5. The pair is consolidating quietly today between roughly MXN17.29 and MXN17.37. The MXN17.4225 area corresponds to the 61.8% retracement of this month’s decline, representing a technically significant level that traders should monitor.
The Brazilian real has also come under pressure. The dollar based around BRL4.88 before jumping higher beginning in the middle of last week. It reached nearly BRL5.0820 before the weekend, marking the dollar’s best level since April 9. A new funding scandal has hit the Bolsonaro family, adding to political uncertainty in Brazil. The next technical area of note is around BRL5.1050–BRL5.1200, levels that could attract significant technical interest if the dollar continues to appreciate.
The Colombian peso has experienced sustained weakness over the past three weeks, driven by domestic political concerns and doubts over the independence of the central bank. The dollar rose in each session last week and reached almost COP3821 before the weekend. The high for the year was recorded in early January near COP3839, suggesting that the currency remains in a downtrend that could extend further if political uncertainty persists.
Rising oil prices and higher global interest rates continue to drag the Indian rupee lower. Counting today, the rupee has fallen for seven consecutive sessions, demonstrating persistent weakness against the dollar. The dollar reached a record high of approximately INR96.3925 in late dealings. Adding to concerns about capital outflows, the central bank has begun investigating foreign investments by Indian companies, a development that could further pressure the rupee if capital repatriation accelerates.
Global Markets
Equities fell heavily before the weekend and have yet to stabilize as the week progresses. Nearly all bourses in the Asia Pacific region declined, with the notable exceptions of South Korea, Singapore, and India. Europe’s Stoxx 600 is off about 0.25% after dropping nearly 1.5% before the weekend, suggesting a modest stabilization but without conviction. US Nasdaq futures are off slightly while the S&P 500 futures are off about 0.3%, indicating a cautious tone as North American markets prepare to open.
Benchmark 10-year yields soared at the end of last week across major developed markets. The United States, Germany, Japan, and the United Kingdom all saw their benchmark yields rise to the highest levels in more than a year. The 10-year Treasury yield recorded an 18 basis point increase, marking the second-largest daily move in the G10 after Japan’s 20 basis point surge in the 10-year JGB yield. Yields have begun the week with a firmer bias, suggesting that the underlying repricing of rate expectations may have further to run.
Rising rates and a stronger US dollar have pressed precious metals lower. Gold reached almost $4,774 last Tuesday and probed $4,512 ahead of the weekend. The yellow metal slipped below $4,500 today for the first time since the end of March, a significant technical breakdown. It recovered to almost $4,560 in early European activity but stalled at that level. A close below $4,500 could target $4,400, representing another significant technical support level. Silver was turned back after it approached $90 in the middle of last week. It settled the week below $77, and follow-through selling today saw it dip below $74 before steadying. The precious metals complex appears vulnerable to further downside if the current trend of rising yields and dollar strength persists.
Crude oil has surged dramatically, with July WTI settling at two-week highs slightly above $101 before the weekend. It set a new contract high today around $104.35, driven by geopolitical tensions and supply concerns. The previous contract high was recorded on April 30 at approximately $103.80, the same day that the Bank of Japan reportedly intervened to support the yen. The catalyst for the current oil rally includes escalating US-China tensions following the conclusion of the Trump-Xi summit, with President Trump’s rhetoric toward Iran intensifying following reports that Iranian drones targeted a nuclear facility in the United Arab Emirates. July WTI reaching a contract high near $104.35 reflects market concerns about potential supply disruptions stemming from Middle Eastern tensions.
The geopolitical backdrop remains fluid, with several unresolved issues likely to continue influencing market sentiment. The concrete outcome of the Trump-Xi meeting may not be known until the US decides on a $14 billion arms package to Taiwan. The mere consideration of this package as negotiable has not set easy in the capitals of US allies, while simultaneously the US has announced a troop withdrawal from Germany and has halted rotation into Poland. These policy developments add layers of uncertainty that could continue to support risk-off sentiment and commodity prices in the near term.
