# United States
The US dollar began the new week facing downward pressure amid the closure of numerous financial centers. Asian Pacific currencies, including the offshore yuan, the Taiwanese dollar, the Japanese yen, the Malaysian ringgit, and the Australian dollar, are showing particular strength. This is in part due to speculation about potential US semiconductor tariffs to be announced midweek and continued discussions about a possible “Mar-a-Lago” currency agreement, which draws from elements of the 1985 Plaza Accord that aimed to devalue the dollar. There is also talk of pushing for local currency revaluation in future trade negotiations. Despite these developments, US equity futures are indicating a decline of 0.65%-0.90%, while US cash Treasuries are not trading due to the holiday, though futures point to significantly lower yields. As gold rebounds, climbing nearly 2% to reclaim the $3300 mark following last week’s 2.4% drop, the June WTI crude contract has fluctuated, currently stabilizing at around $57.50.
The Dollar Index appears to be consolidating within last Friday’s range after a disappointing pullback over the weekend. Despite expectations of an impending US announcement on semiconductor tariffs, the market’s focus is on the Fed’s likely hawkish stance on Wednesday. Nevertheless, soft data hasn’t yet seeped into tangible economic sectors, as evidenced by robust nonfarm payroll figures. While further details of a US-China semiconductor tariff proposal emerge, markets are cautious but eyeing an uptick in US dollar correction moving forward.
# Eurozone
The Euro remains tightly bound within prior market ranges as the final April services and composite PMI data emerges. The ECB is expected to implement another rate cut by June 5, though immediate market movements are more attuned to the broader technical patterns emerging around the euro. Recently, the euro approached recovery just before the weekend, stabilizing within a $1.1295-$1.1350 range. A significant drop below $1.1260 could confirm previous expectations of a topping pattern, though movements above $1.1400-25 might invalidate this analysis. Market participants predominantly anticipate the ECB’s forthcoming actions rather than current PMI implications.
# United Kingdom
With UK markets closed for the bank holiday, attention is fixated on Thursday’s Bank of England meeting, where a further quarter-point rate cut to 4.25% is widely expected. The BOE had already enacted two cuts since August 2024, and further reductions this year are anticipated by the swaps market. If the sterling forms a double top between $1.3425 and $1.3445, the focus will be on its potential break below the $1.3235 neckline, potentially pointing toward $1.3035. Alternatively, if recent adjustments merely reverse last month’s upward trajectory from a $1.27 low on April 7, the key retracement level lies around $1.3165.
# China
Speculation of US-China trade tensions easing contributed to the US dollar’s near 1% drop below CNH7.21, reaching the lowest level since last November. Initially, the greenback slipped below CNH7.119 but later stabilized. With major regional financial centers like Tokyo and Hong Kong on holiday, Asian emerging market currencies helped lift the Taiwanese dollar by approximately 2.4%, following a 3.7% gain previously. Similarly, the Malaysian ringgit continued a five-day upward streak, gaining 1.1%. However, the likelihood of immediate US-China talks appears slim, with existing US pivots portraying a US sensitivity to market volatility over Beijing. Upcoming announcements on US semiconductor tariffs may reshape currency dynamics, albeit speculatively.
# Japan
The Japanese yen encounter shifts as last week’s dovish BOJ stance signals a potential dollar bottoming pattern against the yen. From ten days before Trump’s second inauguration until April 22, the dollar dropped approximately 12% against the yen. A breach above JPY144.00-50 on May 1 supports the notion of a head and shoulders bottom pattern, hinting at directions toward JPY148.00-50. Nonetheless, the dollar retreated to about JPY143.75 before the weekend closure, and although it currently stays above this, a decline below JPY143.40 could instigate further downward pressure.
# Canada
In the Canadian market, the US dollar briefly touched a six-month low near CAD1.3760 before seeing some recovery beyond CAD1.3800. A potential cap is identifiable around CAD1.3860, as upcoming PMI data holds less importance compared to the end-week employment figures. The probability of a rate cut during the Bank of Canada’s June meeting stands at an evenly split 50/50 prospect.
# Australia
The Australian dollar has reached new five-month highs following the electoral victory of the ruling Labor Party. The Australian dollar soared to almost $0.6490, showing considerable strength compared to other G10 currencies. Markets are now targeting thresholds within the $0.6500-25 range. The similarity to Canadian political outcomes suggests a resistance to Trump-aligned rhetoric, with incumbents in wealthy nations showing resilience in recent elections.
# Mexico
The Mexican central bank faces the challenge of addressing weak economic growth alongside inflation concerns. The dollar’s resistance around MXN19.50 gives way slightly, maintaining a constrained range of MXN19.55-MXN19.63. The market anticipates a 50 bp rate cut to 8.50%, but inflationary pressures revealed in Thursday’s CPI data could alter these expectations. Boundary breaches above MXN19.75 would suggest broader currency shifts, with projections leaning toward an MXN20.00 level near the 200-day moving average.
