### United States
The market has been significantly shaken by recent developments involving the breakdown in the US-China trade agreement, the doubling of US steel and aluminum tariffs, and Ukraine’s daring drone attack. This turmoil has sent US stocks, bonds, and the dollar lower. All G10 currencies have gained by at least 0.35%, with Scandinavian currencies leading, up by more than 1%. Despite the Canadian dollar being the weakest among the pack, it has reached new highs for the year. Although emerging market currencies have mostly appreciated, the US dollar is under pressure. The Dollar Index tested last week’s low (~98.70), which matches last month’s trough.
In the US, critical data such as the final manufacturing PMI, the ISM manufacturing index, and April construction spending are expected, but the spotlight is on Fed Chair Powell’s speech at 1 pm EST. Powell’s message may reiterate the Fed’s stance on the resilience of the labor market and the potential timing for monetary policy adjustment. Further insights are expected from tomorrow’s JOLTS report for April and Friday’s nonfarm payroll figures.
### Eurozone
The Euro appreciated today, reaching nearly $1.1440, after last Thursday’s bullish session. The eurozone final May manufacturing PMI remained at 49.4, consistent with earlier estimates, marking consecutive gains for five months. Still, it has not reached the 50 boom-bust level since mid-2022. Ahead of the European Central Bank’s meeting on Thursday, market expectations for a 25 bp rate cut are high, with anticipations of a pause until Q4.
Ukraine’s strategic drone attack, reportedly destroying numerous Russian bombers, highlights regional tensions. Meanwhile, the European markets have shown a downturn, with the Stoxx 600 index declining by nearly 0.3% today.
### United Kingdom
Sterling saw a bid above $1.3550 today after hitting a three-year high last week. Key range levels now appear to be around $1.3640. UK consumer and mortgage data showed limited impact, and even revisions in the manufacturing PMI to 46.4 last month didn’t alter market sentiments significantly. The Bank of England’s upcoming meeting on June 19 does not suggest a rate cut, with only one more anticipated this year.
### China
China’s mainland markets were closed for the Dragon Boat Festival. The recent US-China tariff agreement breakdown comes amid a reported increase in business activity domestically. Weekend reports indicated a slight improvement in PMI figures: manufacturing upticked to 49.5 and non-manufacturing to 50.5. Meanwhile, the composite PMI edged up to 50.3. The dollar strengthened against the yuan, reaching around CNH7.2240.
### Japan
The yen gained traction today despite an increase in US rates, with the dollar slipping slightly above JPY142.75. The Tokyo CPI report underscored this movement. Japan’s final May manufacturing PMI at 49.4 showed improvement over the initial estimate of 49.0. While this marks back-to-back monthly improvements, the PMI remains below 50, a trend ongoing since last May.
### Canada
Despite recent GDP figures indicating stronger-than-expected growth in Q1 (2.2%), markets further downgraded Bank of Canada rate cut probabilities. The US dollar reached a new low against the Canadian dollar, falling to CAD1.3675. The upcoming Bank of Canada’s policy meeting sees limited expectations for a rate change based on recent underlying CPI measures.
### Australia
The Australian dollar saw an increase near $0.6490 today amidst broader market movements. Australia’s manufacturing PMI was revised to 51.0, underlining its position as one of the more robust economies among high-income countries. Focus shifts to the Reserve Bank of Australia’s minutes, Q1 GDP estimates, and trade and household spending reports due shortly.
### Mexico
Mexico’s unemployment data for April revealed an increase, highlighting weaknesses in the economy. Despite recent US dollar weakness, the peso has not exceeded the 20-day moving average. Attention is now on manufacturing PMIs and IMEF surveys, reinforcing recent central bank adjustments to economic forecasts. The US budget proposal also brings possible tax implications on non-citizen offshore transfers to the fore. Judicial elections took place, with candidates competing for positions amidst strict campaigning regulations.
