The capital markets remain hopefully that the US and Iran will reach an agreement. Oil is a little softer and bond yields are lower. However, in Polymarket, the odds that the Strait of Hormuz is open by the end of the month is at around 22%, down from around 35% last week. The odds it is open by the end of next month is 41%. It briefly was below 40% yesterday for the first time in around three weeks.
The dollar is mostly a
little softer but within well-worn ranges. The dollar continues to ease slowly against
the Chinese yuan. Against the offshore yuan, a new three-year low was recorded
today even as the PBOC set the dollar’s fix slightly higher. Meanwhile, the
greenback is trading in a narrow range near yesterday’s high against the
Japanese yen (~JPY159.75), which is the highest the it has been since the April
30 intervention.
Prices
G10
• The euro recorded the session low yesterday in early North American trading, slightly above $1.1605 apparently in response to news reports that due to Israel’s campaign in Lebanon that Tehran was going to stop exchanging messages with the US. After the low was made, the euro recovered to almost $1.1640. It continues to trade quietly today and so far, is in a roughly $1.1630-$1.1655 range. The intraday momentum indicators favor an upside range extension in North America.
• The dollar reached JPY159.75 in North America yesterday, its best level against the yen since the April 30 intervention and is knocking against it in the European morning. It has not been below JPY159.60 today. The dollar settled above JPY159 for the fifth consecutive session. In the 22 sessions since April 30 (intervention), the dollar has risen in all but four. Finance Minister Katayama warned at the end of last week that intervention to counter volatility or speculative move remains an option. One-month implied volatility fell to four-year lows before the weekend, near 6.1%. It was about 7.5% before the intervention on April 30. Similarly, three-month implied vol fell to nearly 7% before the weekend, which it also has not seen in four years. In terms of speculative positioning, the Commitment of Traders report shows that non-commercials have amassed the largest short yen position since 2007 (227.6k contracts, JPY12.5 mln per contract or cumulative ~$17.83 bln) as of May 26. Options for $1.6 bln at JPY160 expire today.
• According to Bloomberg, sterling traded 1/100 of a cent below last Friday’s low. It held above $1.3405 and recovered to approach the session high near $1.3475 by early in the NY afternoon. It briefly poked above $1.3480 today and held above $1.3450. Our reading of the technicals still favor the upside. Initial resistance is in the $1.3480-$1.3500.
• The dollar-bloc currencies were weaker yesterday and the Canadian dollar lost about 0.25%. The greenback rose to almost CAD1.3850 yesterday as it extended the recovery seen before the weekend. It has reached almost CAD1.3855 today. Last week’s high, which was also the high for May, was near CAD1.3870.
• With a few exceptions on an intraday basis, the Australian dollar has traded between $0.7100 and $0.7200 since mid-May. Only a break of this range is meaningful. Here, too, our assessment of the technical condition favors an upside break. It has reached nearly $0.7190 today, where options for A$370 mln expire today.
EM
• The dollar traced a MXN17.21-MXN17.40 range against the Mexican peso on May 15 and with a few exceptions on the upside, has mostly remained in it. Interim support may be around MXN17.28-MXN17.30, which is being tested in Europe today. The Colombian peso soared nearly 3.6% yesterday in response to the first round of the president election. The MSCI Colombian stock index jumped about 4.7% and 10-year local currency bond yield fell 65 bp (to ~12.53%). The price of insuring Colombia’s debt from default (credit default swap) for five years fell to the lowest since last September. The dollar settled near COP3800 on May 15 and trended lower in the run-up to the election. It fell a little through COP3615 in the middle of last week before recovering ahead of the weekend to a slightly more than COP3710. Yesterday, the greenback was sold to almost COP3550. The five-year low was recorded in late April near COP3530.
• The dollar consolidated between CNH6.7620 and CNH6.7710 yesterday against the offshore yuan. It has slipped to a new three-year low near CNH6.7580 today. The greenback has not settled above its five-day moving average in nearly two weeks. It comes in near CNH6.7685 today. The PBOC set the dollar’s fix a little higher today (CNY6.8187 vs. CNY6.8167 yesterday, a new multiyear low)
• The dollar rose against the Indian rupee today, the first gain in three sessions. It was sold to INR94.73 yesterday, its lowest level since May 8 but settled near session highs. Foreign equity sales of Indian stocks and bonds yesterday took a toll on the rupee today. The dollar rose a little more than 0.25% to settle near INR95.27 today.
Other Markets
• US equities continued to push ahead. The S&P and Nasdaq set new records. Through May, the Russell 2000 was up a little more than the Nasdaq. The Russell 2000 record high was last week. Most of the large bourses, but Japan and Australia rose today. Hong Kong and the index of mainland stocks led the regional advance with gains of 2.5% and 3.0%, respectively. Europe’s Stoxx 60 is up about 0.65% in late morning turnover, recouping most of yesterday’s loss. US index futures are trading with a heavier bias.
• The US 10-year yield rose yesterday for the first time in eight sessions. At highest, it was approaching 4.52% but finished the session near 4.47%. European benchmark 10-year yields are unwinding most of yesterday’s 6-8 bp jump. Yields are off mostly 5-6 bp today. The 10-year JGB yield peaked on May 20, near 2.81% and is now close to 2.55%, with today’s nearly 11 bp decline today, following a robust auction. The 40-year JGB yield peaked near 4.22% on May 18 and is now at 3.77%.
• Gold is trapped between the 200-day moving average near $4406 and the 20-day moving average around $4585. It is showing a firmer profile today and is near $4530 late in the European morning. Silver continues to trade quietly in last week’s range (~$71.80-$78.80). It is also firmed today and is near $76.30 in Europe.
• July WTI reached almost $95.80 on yesterday’s geopolitical news. This closed the gap left on the charts from the lower opening on May 26. It pulled back with the help of President Trump’s assurances that negotiations were still taking place. It saw a low near $90.80 in the NY afternoon and settled a little above $92. The 5.5% rise was the largest since the end of April. It has come back softer today. It is in a range a little above $90 to $92.65 and is near $91 late in the European morning.
Data
• US jobs are the economic focus this week. April jobs opening (JOLTS) is expected to be little changed when it is reported today, near March 6.866 mln. Tomorrow, the ADP private sector jobs estimate is due and the median forecast in Bloomberg’s survey is for 120k, which would be the most since January 2025. May auto sales will trickle in and small increase from 15.92 mln (seasonally adjusted annual rate) in April. US sales have averaged 15.72 mln pace in the first four months of the year, down from 16.66 mln the Jan-Apr period last year, which may have been flattered by trying to front run tariffs and secure tax breaks for EVs.
• After the large members reported their CPI figures last week, the eurozone aggregate reading was not a surprise. The headline May CPI rose to 3.2% from 3.0%, reflecting a 0.1% month-over-month rise. The core rate rose to 2.5% from 2.2%. The swaps market has a rate hike next week nearly fully discounted.
• The UK reported a GBP1.9 bln rise in April consumer credit. It rose almost GBP2 bln in April 2025 and is the first slowing in the year-over-year pace since May 2025. UK figures, unlike US consumer credit, exclude student loans. Separately, mortgage lending slowed in April even as approvals rose.
• Ahead of tomorrow’s Q1 26 GDP, Australia reported today that net exports were a 0.8% drag on growth in the first three months of year after revision showed a flat contribution in Q1 (initially it was estimated to have shaved growth by 0.1%).The current account deficit widened to A$27.1 bln from a revised A$23 bln (A$21.1 bln initially) in Q4 25. Meanwhile, April building approvals continue to slow after surging by 31% in February (month-over-month). They fell 10.5% in March and 3.4% in April. The median forecast in Bloomberg’s survey is for 0.5% quarter-over-quarter GDP in Q1 26 after posting 0.8% growth in Q4 25.
Reviewed by Marc Chandler
on
June 02, 2026
Rating:
