United States
The US dollar is strengthening against the G10 currencies today, with sterling seeing the most pressure due to disappointing UK jobs data. Meanwhile, the dollar’s performance against emerging market currencies is mixed. The Mexican peso and Brazilian real both reached their strongest levels of the year yesterday. Today’s US economic calendar is relatively light, with attention focused on tomorrow’s Consumer Price Index (CPI) report and ongoing US-China talks in London, primarily about export controls. The discussion points include chips for magnets and rare earths, with a framework for a potential deal beginning to take shape.
In global markets, most Asia Pacific bourses posted gains, with China and Hong Kong as notable exceptions. Strong orders for TSMC boosted Taiwan’s equity market by 2%. Europe’s Stoxx 600 is nursing small losses, and US index futures remain largely unchanged. European benchmark 10-year yields are down by 2-3 basis points, and the 10-year US Treasury yield has declined slightly to 4.45%. Gold is trading within a range between $3302 and $3335, while July WTI crude is trading near a two-month high of $65.60.
The US Dollar Index remains within its recent range, near this year’s low recorded in April. It is currently testing the upper boundary of this month’s range around 99.40. A breakthrough past the 20-day moving average (~99.60) could potentially change the technical tone, although this level hasn’t been closed above since May 19th. Ahead of tomorrow’s May CPI report, the Federal Open Market Committee (FOMC) is observing a media blackout period prior to their meeting next week.
Eurozone
Yesterday, the euro dipped below $1.1390 before recovering to approximately $1.1425 in North American afternoon trading, without managing to challenge the European session high near $1.1440. It continues to trade within the range established last Friday (~$1.1370-$1.1455). The steady US unemployment rate, combined with expectations for a strong US CPI tomorrow and ongoing trade talks with China, seems to be providing some support for the dollar over the euro.
United Kingdom
Sterling faced downward pressure today following disappointing labor market data, falling to $1.3455, breaching the 1-2-week trendline near $1.3525. Average weekly earnings growth slowed to 5.3% year-on-year in April, and job growth is decelerating as well, with the unemployment rate at 4.6%, its highest since July 2021. Although the number of payrolled employees fell by 109k, there is little indication this will prompt the Bank of England to cut rates next week, though market odds for an August rate cut have increased to around 80%.
China
The US dollar continues to consolidate within last Friday’s range (~CNH7.1715-CNH7.1940), slightly exceeding it today. The PBOC set the dollar’s reference rate at CNY7.1840. The US-China trade negotiations continue in London, with Commerce Secretary Lutnick’s participation sparking speculation that US export controls may be addressed. While the US has targeted China through export controls, China has been leveraging its dominion over rare earths and magnets. The talks may include discussions over recent roadblocks in technology controls announced since the Geneva agreement a month ago.
Japan
In trading yesterday, the dollar was between JPY144 and JPY145. Buying pushed the greenback through a trendline against the Japanese yen, reaching JPY145.30 before retracing. Japan reported a 3.4% year-over-year increase in May’s preliminary machine tool orders, though the month-over-month trend reveals a slowdown, particularly after orders surged 27.8% in March. Though foreign orders have been more resilient than domestic orders, the market remains cautious about immediate further growth.
Canada
The US dollar briefly traded above last weekend’s high near CAD1.3705, reaching CAD1.3730 today. This marks the third consecutive session with higher highs and lows. Canada announced a C$9 billion increase in defense spending, bringing the NATO target forward to FY25-26 from FY30. Canada is also revisiting its defense equipment needs, potentially favoring European producers alongside or instead of US contractors.
Australia
Confidence surveys from two Australian banks had little impact on the Australian dollar, which approached the upper end of its recent range near $0.6540. The currency briefly touched its highest close since November near $0.6515 yesterday. With no follow-through buying today, the Australian dollar remains in its familiar range (~$0.6480-$0.6540), trading steadily between $0.6490 and $0.6530.
Mexico
The dollar fell to a new low against the Mexican peso, slightly under MXN19.03, after a brief surge during Mexico’s CPI report, which came in slightly above expectations. Headline inflation rose to 4.42%, the core to 4.06%, both exceeding the central bank’s 2%-4% target range for the first time since July of last year. The nearly 11% jump in vehicle production in May is a positive sign, though still about 2% lower than a year ago. As the peso settles from recent lows, it is consolidating today between about MXN19.0345 and MXN19.10, with a next possible target closer to MXN18.80.
