### United States
The US dollar has found some stability after experiencing a decline, as disappointing flash May PMI readings from Europe and the Asia Pacific emerge. Discussions around exchange rates during bilateral trade talks with the US, as well as significant unhedged dollar exposure, have contributed to unease among Asian currencies. The dollar has shown some resilience today, edging higher against all G10 currencies except the Japanese yen, which is also affected by foreign exchange talks. US equity markets saw a sharp decline previously, affecting the Asia Pacific bourses, though Indonesia was a notable exception, with the rupiah gaining approximately 0.4% against the US dollar. European markets, represented by the Stoxx 600, are down nearly 1%, marking the first consecutive losses in two weeks.
In terms of fiscal impacts, the US two- to 10-year yields collectively decreased by 1-2 basis points. Gold achieved a nine-day high nearing $3345 before retracting to below $3305. Oil prices faced fluctuations as well, with WTI near $64.20 following reports of potential Israeli strikes on Iran before settling around $61.35. Confirmation of OPEC+ plans to continue boosting output has contributed to further declines, settling around $60.40.
The US Dollar Index recently fell below 99.50, marking the 6.18% retracement of a previous bounce, and consolidated between 99.45 and 99.85. Resistance is noted in the 100.00 area. Though momentum indicators suggest a downtick, the potential for financial stress related to labor market weaknesses remains. Job growth has slowed, with three-month average non-farm payrolls below the six-month average, marking a year-over-year decline. Today’s weekly jobless claims may provide further insights, as immigration cooling, government layoffs, and weak tourism bookings present ongoing risks. The preliminary May PMI might hold little weight compared to other market indicators, while April’s existing home sales are expected to improve from March’s nearly 6% decline.
### Eurozone
The euro attempted a rally above the 20-day moving average, reaching beyond $1.1360. Resistance was met at the $1.1380 area, indicating a 61.8% retracement from the late April decline. Momentum indicators suggest positive movement, though the euro struggled in today’s trading, falling to approximately $1.1290. Support is anticipated between $1.1265 and $1.1280.
A disappointing May PMI saw eurozone manufacturing contracting slightly at 49.4, consistent but still below the threshold level of 50. The services sector fell back below 50 to 48.9, marking the largest decline of the year. Germany’s manufacturing and services PMIs remained below 50, while France’s PMI readings edged up slightly without surpassing the threshold. The ECB is still expected to cut rates at its upcoming meeting, reflecting ongoing challenges within the eurozone economy.
### United Kingdom
Sterling achieved a three-year high at approximately $1.3470, with bullish momentum suggested by short-term averages. However, today marked a period of consolidation; a break below $1.3370 could signal a corrective phase. The UK’s preliminary May manufacturing PMI fell slightly to 45.1, while the services PMI rose modestly above 50 to 50.2. The composite index remained below 50, maintaining a weakened outlook as compared to May 2024 when it stood at 53.0.
### China
After a six-day high near CNH7.2265 on Tuesday, the dollar’s decline led it back below CNH7.20. This was further driven by better dollar traction, which saw it recover to CNH7.2080 against the yuan. The People’s Bank of China set the dollar’s reference rate at CNY7.1903, the lowest since early April, which may limit the dollar’s upside and the yuan’s downside.
### Japan
The yen continues to be affected by foreign exchange-related discussions, with the dollar falling against it for the third consecutive session. After initial losses today, the dollar dipped to JPY142.80 before recovering but appears to be stalling around JPY143.50. Japan’s PMI indicates ongoing challenges—manufacturing at 49.0 and services down to 50.8. Long-term interest rates have caused concern within the financial industry, notably impacting bank and insurance shares.
### Canada
Against the Canadian dollar, the US dollar saw a third straight day of losses, dipping to CAD1.3815. With today’s testing of resistance near CAD1.3920, the technical landscape is turning as daily momentum indicators trend lower.
### Australia
The Australian dollar has rebounded after prior central bank-related losses, reaching a five-day high near $0.6470. It remains within a consolidation range, with PMI readings providing insights into market stability—manufacturing slightly up while services declined to 50.5.
### Mexico
The Mexican peso weakened slightly against the dollar. Correlations between the peso and US equity performance are significant, which may explain recent fluctuations. Economic indicators, such as Q1 GDP estimates, March IGAE, and May CPI, will provide further economic context. Despite a firmer CPI, Banxico is likely to reduce interest rates by 50 basis points at its next meeting.
