United States
The US dollar has recouped most of its losses from yesterday’s North American afternoon session following news that military action against Iran has been called off at the request of Gulf allies. The greenback’s recovery underscores market sentiment that de-escalation of regional tensions may pave the way toward conflict resolution. The dollar index has stabilized after initial weakness, though broader sentiment remains cautious given ongoing geopolitical uncertainties and trade negotiations.
Benchmark 10-year Treasury yields are predominantly firmer, with the 10-year yield advancing nearly two basis points to trade above 4.60%. This yield strength reflects a combination of risk-off positioning and expectations around the Federal Reserve’s forward guidance. The data calendar this week remains relatively light, with pending home sales for April expected to show only modest gains. The previous month saw existing home sales edge up by 0.2% after a revised 2.9% decline in March, when pending home sales had risen 1.5%.
Federal Reserve communications remain in focus, with Governor Waller scheduled to speak early in the US session and Philadelphia Federal Reserve President Paulson addressing markets during the Asia Pacific session. These remarks come ahead of tomorrow’s release of FOMC meeting minutes, which will provide crucial insight into the Committee’s thinking on monetary policy trajectory. The swaps market continues to price in a cautious stance on rate adjustments, reflecting uncertainty about inflation persistence and economic growth momentum.
Eurozone
The euro snapped a five-day losing streak yesterday after initially extending losses through $1.1610 before recovering to $1.1660 in late European dealings. The recovery was triggered by President Trump’s announcement that military strikes on Iran have been postponed at the request of Gulf allies. However, follow-through euro buying has proven elusive, and the single currency retreated to $1.1615 in this morning’s European session. Last Friday’s high was established near $1.1675, and support is currently identified in the $1.1580–$1.1600 area. Options for nearly 2.5 billion euros struck at $1.1650 expire today, representing a technical level that traders will monitor closely.
The G7 finance and central bankers’ meeting concludes today amid a backdrop of trade tensions and policy disagreements. The United States has threatened to increase tariffs on EU vehicles if a trade agreement is not approved by July 4, creating friction during these discussions. Additionally, the unilateral US decision to extend waivers on Russian oil sanctions has met opposition from many European policymakers, adding to diplomatic strain. The eurozone’s March trade balance showed a surplus of 3.5 billion euros compared to a 26 billion euro surplus in March 2025 and 14.1 billion in March 2024. On a quarterly basis, the Q1 2026 trade surplus stood at approximately 21 billion euros, roughly half the Q1 2025 surplus of 56.2 billion euros. Tariffs have reduced US demand for eurozone exports, while imports from China have risen approximately 12% since last April, reflecting shifting trade patterns in response to protectionist measures.
United Kingdom
Sterling rose for the first time in six sessions yesterday, posting an impressive 0.75% gain—the largest move in two-and-a-half weeks. The currency tested support near $1.3300 before recovering to $1.3450, with the session characterized by an ostensibly bullish outside-up day in which sterling traded on both sides of last Friday’s range before settling above it. This move allowed sterling to overshoot the 38.2% Fibonacci retracement level of last week’s slide, which was calculated near $1.3435. Sterling is currently straddling the $1.3400 area after the weak labor market report, trading in the upper end of yesterday’s range with resistance now identified around $1.3420.
The UK labor market report released today disappointed expectations significantly. Payrolled employees fell by 100,000, substantially worse than the median Bloomberg survey forecast of a 10,000 decline. The March figure was revised downward from a loss of 11,000 jobs to a loss of 28,000. The claimant count rose by 26.5k in April, compared to a March increase that was revised from 26.8k to 4.9k. The unemployment rate, as measured by the ILO, ticked up to 5.0% from 4.9%. 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 wage pressure may be moderating.
Tomorrow, the UK will report April CPI figures. Due to favorable base effects—last April’s CPI jumped 1.2%, which drops out of the 12-month comparison—both headline and core year-over-year rates may slip lower. Despite some hawkish commentary from Bank of England officials such as Governor Greene, the swaps market is pricing in only a little more than 20% probability of a rate hike at next month’s meeting, rising to almost 80% by the end of July. This suggests the market expects the BOE to maintain its current stance in the near term, with hiking odds rising only as the summer progresses.
China
The offshore yuan has demonstrated sustained strength, appreciating in 12 of the past 13 sessions with the exception of last Friday. The greenback pierced CNH6.82 for the first time in eight sessions before being driven lower to the session low near CNH6.7975 in the North American morning yesterday. Currently, the greenback is trading firmly slightly below CNH6.81 in European turnover, reflecting persistent yuan strength. The People’s Bank of China set the dollar’s reference rate at CNY6.8375, marking a new multiyear low. The previous multiyear low had been recorded last Thursday at CNY6.8401, demonstrating the PBOC’s continued management of the currency through its daily fixing mechanism.
The strength in the offshore yuan reflects broader economic developments and capital flow dynamics within China’s financial markets. While specific PMI data for the current period has not been highlighted in today’s session, the sustained appreciation of the yuan against the dollar suggests underlying confidence in Chinese economic fundamentals and potential capital inflows seeking exposure to yuan-denominated assets.
Japan
The dollar rose for the sixth consecutive session against the Japanese yen yesterday, matching the longest rally of the year. Despite stronger-than-expected Japanese Q1 GDP data, the dollar has continued to edge higher in today’s session. The yen had fallen for seven of eight sessions before the Bank of Japan apparently intervened on April 30. However, as noted at the time, the dollar had declined for three consecutive weeks through April 17 before recovering approximately 0.5% in the week prior to the intervention. The dollar reached slightly above JPY159.15 in European turnover and is currently trading in a narrow range of less than half a yen. Options for nearly $635 million struck at JPY159 expire today, representing a key technical level for traders to monitor.
Japan reported Q1 2026 economic growth of 2.1% at an annualized pace, compared to Q4 2025 growth that was revised downward to 0.8% from the initially reported 1.3%. Consumption rose by 0.3%, slightly better than expected, though Q4 2025 consumption was revised down to flat from a previously reported 0.3%. Government spending decelerated to 0.4% from 1.5%, while private investment slowed to 1.1% from 5.6%. Capital expenditure similarly moderated. Inventories subtracted 0.1% from GDP growth, compared to a negative 0.4% contribution in Q4 2025. Net exports contributed positively 0.3% after a flat contribution in the prior quarter. The 10-year Japanese Government Bond yield jumped 5.5 basis points following the GDP data release, reflecting market repricing of growth expectations and potential monetary policy implications. Japan is scheduled to sell 20-year bonds tomorrow, which will test demand at the longer end of the yield curve.
The swaps market is now pricing in almost a 78% probability of a Bank of Japan rate hike next month, up significantly from approximately 65% at the end of April. This sharp increase in hike probability reflects the stronger-than-expected growth data and suggests markets are positioning for potential monetary tightening. Intervention risk remains a consideration given the yen’s weakness and the authorities’ demonstrated willingness to act in defense of the currency during volatile sessions.
Canada
The Canadian dollar stabilized yesterday after entering the week having declined in 10 of the past 11 sessions. The loonie edged up slightly yesterday, with the greenback trading quietly inside last Friday’s range of approximately CAD1.3715 to CAD1.3765. However, the Canadian dollar is on its back foot again today as the greenback edges above last week’s high. Resistance is now identified in the CAD1.3800–CAD1.3815 area, representing a key technical level for USD/CAD bulls to overcome.
Another substantial rise in Canada’s CPI is expected today, with the median Bloomberg survey forecast calling 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. The Bank of Canada is scheduled to meet on June 10, and the swaps market is pricing in minimal probability of a policy change at that meeting. However, a rate hike is nearly fully discounted by the end of Q3, suggesting markets expect tightening measures later in the year as inflation dynamics evolve.
Australia
The Australian dollar initially extended last week’s decline and fell to approximately $0.7120, marking a new low for the month. The aussie subsequently rebounded and set the session high at almost $0.7185 in the North American morning yesterday. Sellers have taken it slightly through $0.7110 today, and a break of the $0.7100 support level could target $0.7055 next. Options for nearly A$1 billion struck between $0.7135 and $0.7150 roll off today, representing expiring technical levels that may influence intraday price action.
The Reserve Bank of Australia’s meeting record from earlier this month, when it hiked rates for the third consecutive time this year, reinforced market perception that while the tightening cycle is not complete, 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 in the second half of 2026, suggesting markets expect a measured approach to further monetary policy adjustments. Private credit dynamics and broader financial conditions will remain important considerations as the RBA calibrates its forward guidance.
Emerging Markets
The dollar jumped almost 0.7% against the Mexican peso at the end of last week and consolidated in quiet turnover yesterday. The greenback recorded an inside session and found support near MXN17.2570. Currently, it is consolidating inside yesterday’s range, though price action appears constructive. The high recorded at the end of last week was around MXN17.4030, providing a reference point for resistance.
The Indian rupee declined for the eighth consecutive session today, hitting a new record low. Some reports suggest the central bank may have intervened around INR96.34 in an attempt to support the currency. The dollar reached almost INR96.6165, reflecting substantial weakness in the rupee. The approximately 1.7% decline this month brings the year-to-date rupee loss to 6.9%, demonstrating sustained depreciation pressure. The Indonesian rupiah has also fallen to record lows, suggesting broader emerging market currency weakness amid global risk repositioning and capital flow dynamics.
Global Markets
Equities are mixed today, with regional performance varying considerably. In Japan, the Nikkei fell while the Topix rose, reflecting divergent sector performance. China and Hong Kong markets posted gains, but a liquidation in the technology sector weighed on Taiwan’s Taiex, which declined 1.75%, while South Korea’s Kospi was hit harder, falling 3.25%. Europe’s Stoxx 600 is up almost 0.7%, and combined with yesterday’s gains, it has nearly recouped the approximately 1.5% loss incurred before the weekend. US index futures are trading lower, warning that the pullback from last week’s record highs is not yet complete and suggesting consolidation may continue as markets digest geopolitical developments and economic data.
Benchmark 10-year yields are predominantly firmer across major markets. Most European yields are around one basis point better, while the 10-year Treasury yield has advanced nearly two basis points to trade above 4.60%. The 10-year Japanese Government Bond yield jumped 5.5 basis points following the stronger-than-expected GDP data, reflecting rapid repricing of growth and policy expectations in Japan.
Gold was initially sold through $4,500 yesterday for the first time since late March, reflecting risk-on sentiment and dollar strength. However, it recovered and recorded session highs slightly above $4,584. It consolidated mostly above $4,535 in the North American afternoon before coming back better offered after stalling near $4,589. The yellow metal could re-challenge the $4,500 area, with technical support and resistance levels likely to guide trading in coming sessions.
Silver traded at a seven-session low slightly below $74 and rebounded to poke above $78. Silver traded mostly between $76 and $77.25 in the North American afternoon. It reached almost $79 today before being turned back to slightly below $75.50, reflecting the volatility characteristic of precious metals trading during uncertain geopolitical periods.
July crude reached new contract highs during the Asia Pacific session yesterday near $104.35. It was sold to the session low of approximately $98.60 in early North American turnover but recovered back to around $103.65 before consolidating above $102. Currently, it is trading between approximately $102 and $104 today, near the middle of the range ahead of the US open. The US extended the waiver of sanctions on those who purchase Russian oil that is already in tankers at sea for 30 additional days. Previously, the US had warned that sanctions would not resume, though this latest extension provides continued relief. Some analysts suggest that without such waivers, China would be the most important buyer of discounted Russian oil, making the geopolitical dimension of energy markets particularly significant for global crude pricing and supply dynamics.
