The US dollar is mostly firmer, though the Australian and New Zealand dollars are resisting the pull. The euro is trading in almost a 15-tick range on both sides of $1.16, and even with a Gilts-rally spurred by lower-than-expected inflation, sterling is struggling to recapture $1.34. The yen has fallen for the past seven sessions and is little changed now, in a narrow band around JPY159. There has not been intervention, but the market knows it is tempting officials. At the same time, the fragile ceasefire in Iran may ended in the coming days and this is keeping investors on edge. Oil prices are softer amid reports of three supertankers have passed through the Strait of Hormuz today.
The preliminary May PMI surveys are due tomorrow and are expected to show more of the war’s disruption to both prices and activity. The minutes from the Powell’s last FOMC meeting as chair are due today and will likely show more support for a neutral stance than the three dissents indicated. After the markets close today, Nvidia will report earnings.
Prices
G10
• After Monday’s short-covering rally fizzled, the euro’s decline resumed yesterday. The single currency fell to almost $1.1590, its lowest level since April 8. Today, it has edged a little close to the (61.8%) retracement of the rally from the year’s low on March 16 (~$1.1410) found near $1.1580. The positioning of the momentum indicators warn of more downside potential, which could extend toward $1.1515-25 next. It has not traded above $1.1615 today.
• In the 13 sessions this month, the yen was weakened in all but two and that includes the seven-day slide coming into today. In the 13 sessions before the April 30 BOJ intervention, the yen weakened in 10 of the sessions. One-month implied volatility settled slightly below 7.4% yesterday, essentially flat since the day before the April 30 intervention.
• Monday’s potentially bullish key reversal failed to spur follow-through gains yesterday. In fact, sterling gave back half of yesterday’s advance from almost $1.33, its lowest level since April 8. Sterling has been confined to a narrow range so far today between about $1.3375 and $1.3405. A break of $1.3360 signals a retest on Monday’s low.
• Softer than expected inflation helped the greenback extend its gains against the Canadian dollar to almost CAD1.3775. It was the US dollar’s ninth advance in ten sessions. The greenback has edged up to almost CAD1.3780. We have suggested potential into the CAD1.3800-15 area. Initial support now is around CAD1.3740.
• The Australian dollar was sold to $0.7080 yesterday, its lowest level since April 14. It stopped shy of the $0.7055 area, which corresponds to a halfway mark of the Aussie’s rally from the March 30 low (~$0.6835). The momentum indicators have only recently turned down, giving plenty of scope for additional declines. Moreover, the five-day moving average crossed below the 20-day moving average for the first time since in over a month. It is trading quietly in the lower end of yesterday’s range, holding below about $0.7115 and above $0.7085.
EM
• Amid the risk-off environment, the Mexican peso fell to two-week lows yesterday. The greenback settled above the 20-day moving average (~MXN17.3445 today) for the first time since May 5. It rose to almost MXN17.41. Today it briefly overshot the MXN17.4225 area that represents the (61.8%) retracement of this month’s decline before sellers emerged and pushed it back to almost MXN17.3750.
• The dollar is consolidate against the Chinese yuan. Yesterday, the dollar held a little below Monday’s high against the offshore yuan (~CNH6.8215) but the move does not appear over. A move above CNH6.8250 could signal gains into the CNH6.85 area. It is trading so far today within yesterday’s range. The PBOC set the dollar’s reference rate a little higher today (CNY6.8397 vs. CNY6.8375, multi-year low yesterday).
• The Indian rupee’s slide continues. The greenback reached a record high near INR96.9650. The central bank reportedly sold a small amount of dollars, but it was not sufficiently forceful to stem the tide. The pressure on the rupee continued even though Indian stocks and bond rose today.
Other Markets
• After extending their slide yesterday, the S&P 500 and Nasdaq recovered and reached new session highs in the NY afternoon before pulling back into the close. The index futures are trading higher now. Asia Pacific equities sold off today. The regional MSCI Index fell for the fourth consecutive session. Indian equities were a notable exception. Indonesian equities fell as well, despite the 50 bp rate cut by the central bank. The market anticipated a quarter-point cut. Europe’s Stoxx 600 is higher for the third session, which if sustained would be the match the longest rally since the Middle East war began.
• Benchmark 10-year bonds continued to sell off yesterday, despite the stability in oil prices and the sell-off in equities. The US 10-year yield rose every day last week, and after slipping by less than a basis point on Monday, tacked on another seven basis points yesterday. Yields have pulled back today. The Treasury yield is almost three basis points lower to 4.64%. The 10-year JGB yield slipped a basis point, while European benchmarks are 2-5 bp lower, though softer than expected UK CPI has pushed the 10-year Gilts yield eight basis points lower.
• Gold has struggled recently under the weight of the rising dollar and yields. The yellow metal traded on both sides of Monday’s range. Although it settled within Monday’s range it closed below $4500 support for the first time since late March. It has struggled to re-establish a foothold above $4500. It fell slightly below $4454 before recovering to about $4493 before stalling. Silver also posted an outside day but settled below Monday’s low. Yet, there has been no follow-through selling today and silver regained the $75 handle in Europe.
• July WTI remained firm yesterday. It traded in the upper end of Monday’s range when the contract high was recorded near $105.20. Yesterday’s range was about $102.10-$104.70. It is a bit softer today. So far, the range is about $1.01.60-$104.45. Reports suggest three supertankers were moving through the Strait of Hormuz, two of which were Chinese and the other South-Korean flagged.
Data
• In an otherwise quiet economic diary, the record from the recent FOMC meeting will be released late in the North American session today. The FOMC meeting saw four dissents—one by Governor Miran who has vacated his seat for the new chair Warsh. Three dissented over the statement though the minutes will likely show more were sympathetic and it seemed more an issue of timing than substance. Governor Barr addresses consumer financial health at a conference in Atlanta today.
• Despite a 0.7% jump in the UK’s headline CPI (0.9% expected), the year-over-year rate slipped to 2.8% from 3.3%. The counter-intuitive results were a function of last April’s 1.2% surge that was driven by the increase in administered prices for energy, water, train fares, and local authority taxes. The increase in core prices slowed to 2.5% from 3.1%, while services price inflation slowed to 3.2% from 4.5%. The chances of a hike at next month’s BOE meeting eased to about 15%, less than half of what it was at the end of last week and the lowest in two months. The odds have been pared in five of the last six sessions.
• As widely anticipated, Chinese banks left their one- and five-year loan prime rates steady at 3.0% and 3.5%, respectively.
Reviewed by Marc Chandler
on
May 20, 2026
Rating:
