The US greeted the news late yesterday that the US would not bomb Iran, apparently as planned, as a constructive sign that would lead to a resolution of the conflict. Asia and Europe appear less sanguine. The dollar has recouped most of what it lost in yesterday’s North American afternoon. Benchmark 10-year yields are mostly firmer. Oil is softer but the July WTI contract held above $102 and July Brent, above $109. On Polymarket, there is slightly less than a 33% chance of the Strait of Hormuz opening by the end of next month.
The G7 finance and central bankers’ meeting concludes today. With the US turning on its allies and threatening to increase the tariffs on EU vehicles if the trade agreement is not approved by July 4, it makes for awkward meetings. Greenland officials have indicated that the US desire to control and own it remains intact. The US waiver on Russian oil was a unilateral decision and many European centers oppose it.
Prices
G10
• The euro snapped a five-day slide yesterday after initially the losses were extended slightly through $1.1610. It recovered to $1.1660 in late dealings after President Trump indicated at that the request of Gulf allies he agreed to call off today’s strike on Iran. Last Friday’s high was near $1.1675. There was no follow-through euro buying and the single currency returned to $1.1615 in Europe. Support is seen in the $1.1580-$1.1600 area. Options for almost 2.5 bln euros at $1.1650 expire today.
• The dollar rose for the sixth consecutive session against the Japanese yen yesterday. It matches the longest rally of the year. The dollar has edged higher today even though the stronger than expected Japanese Q1 GDP. The yen had fallen for seven of eight sessions when the BOJ apparently intervened on April 30, though as we noted at the time, the dollar has fallen for three consecutive weeks through April 17 before recovering a little less than 0.5% in the week prior to the intervention. The dollar reached slightly above JPY159.15 in European turnover though is in a narrow range of a little less than a half a yen. Options for nearly $635 mln at JPY159 expire today.
• Sterling rose for the first time in six sessions yesterday. It tested support near $1.33 before it recovered $1.3450. Sterling posted an ostensibly bullish outside up day as it traded on both sides of last Friday’s range and settled above it high. The roughly 0.75% gain was the most in two-and-a-half weeks. In one fell swoop, sterling overshot the (38.2%) of last week’s slide (~$1.3435). Sterling is trading in the upper end of yesterday’s range. It is straddling the $1.3400 area after the weak labor market report. Resistance is now seen around $1.3420.
• The Canadian dollar stabilized. Coming into this week’s activity, the Canadian dollar has declined in 10 of the past 11 sessions. It edged up a little yesterday. The greenback traded quietly inside last Friday’s range (~CAD1.3715-CAD1.3765). However, the Canadian dollar is on its back foot again today. The greenback is edging above last week’s high. Resistance is seen in the CAD1.3800-15 area.
• The Australian dollar initially extended last week’s decline and fell to about $0.7120, a new low for the month. It rebounded and set the session high, almost $0.7185 in the North American morning yesterday. Sellers took it slightly through $0.7110 today. A break of the $0.7100 area could target $0.7055 next. Options for nearly A$1 bln struck between $0.7135 and $0.7150 roll-off today.
EM
• The dollar jumped almost 0.7% against the Mexican peso at the end of last week and consolidated in quiet turnover yesterday. The greenback recorded an inside session and found support near MXN17.2570. It is consolidating inside yesterday’s range today, though the price action looks constructive. The high recorded at the end of last week was around MXN17.4030.
• With the exception of last Friday, the offshore yuan has appreciated in 12 of the past 13 sessions. The greenback pierced CNH6.82 for the first time in eight sessions before being driven to the session low near CNH6.7975 in the North American morning yesterday. It is trading firmly, slightly below CNH6.81 in Europe. The PBOC set the dollar’s reference rate at CNY6.8375, a new multiyear low. The previous low was recorded last Thursday at CNY6.8401.
• The Indian rupee declined for the eighth consecutive session today, hitting a new record low. Some reports suggest the central bank may have intervened around INR96.34. The dollar reached almost INR96.6165. The roughly 1.7% decline this month brings the year’s rupee loss to 6.9%. We note that the Indonesian rupiah also has fallen to record low.
Other Markets
• Equities are mixed today, and this was reflected in Japan, where the Nikkei fell but the Topix rose. China and Hong Kong markets rose, but the liquidation in the tech sector saw Taiwan’s Taiex fall 1.75%, while South Korea’s Kospi got hit for 3.25%. Europe’s Stoxx 600 is up almost 0.7%, and with yesterday’s gain, it has almost recouped the nearly1.5% loss incurred before the weekend. US index futures are lower, warning the pullback from last week’s record-highs is not over.
• Benchmark 10-year yields are mostly firmer. The 10-year JGB yield jumped 5.5 bp following the GDP data. Japan sells 20-year bonds tomorrow. Most European yields are around one basis point better, while the 10-year Treasury yield is up nearly two basis points to poke above 4.60%.
• Gold was initially sold through $4500 yesterday for the first time since late March. It recovered and recorded session highs slightly above $4584. It consolidated mostly above $4535 in the North American afternoon. It has come back better offered after stalling near $4589. It could re-challenge the $4500 area. Silver traded at a seven-session low, a little below $74 and rebounded to poke above $78. Silver traded mostly between $76 and $77.25 in the North American afternoon. It reached almost $79 today before it was turned back to a little below $75.50.
• July crude reached new contracts highs year during the Asia Pacific session yesterday, near $104.35. It was sold to the session low (~$98.60) in early North American turnover. However, it recovered back to around $103.65 before consolidating above $102. It is trading between about $102 and $104 today and is near the middle of the range ahead of the US open. The US extended the waiver of sanctions on those who buy Russian oil that is already in tankers at sea for 30 more days. Previously, the US warned the sanctions would not resume. Some suggest that without the waivers, China is the most important buyer of cheap Russian oil.
Data
• In a relatively quiet data week, the US pending home sales for April are due today. A small gain is expected. Last week, we learned that existing home sales edged up in April by 0.2% after a revised 2.9% (from 3.6%) decline in March, when pending home sales rose by 1.5%. Governor Waller speaks early today and Philadelphia Fed President Paulson during the Asia Pacific session, ahead of tomorrow’s FOMC minutes.
• Another large rise in Canada’s CPI is expected. The median forecast in Bloomberg’s survey is for a 0.7% month-over-month increase in April for a 3.1% year-over-year pave. The underlying core measures at seen little changed (2.2%-2.3%). The Bank of Canada meets on June 10, and the swaps market sees little chance of a change in policy. A hike is nearly fully discounted by the end of Q3.
• With Q1 growth in hand, the eurozone's March trade balance drew little interest today. The trade surplus of 3.5 bln euros compared a 26 bln euro surplus in March 2025 and 14.1 bln in March 2024. At about 21 bln euros, the Q1 26 trade surplus was about half of Q1 25 (~56.2 bln euros). Tariffs have reduced US demand for EMU exports while imports from China are up about 12% since last April.
• The UK’s labor market report disappointed. Payrolled employees fell by 100k. The median in Bloomberg’s survey looked for a loss of 10k and the March figure was revised from a loss of 11k jobs to a loss of 28k. The claimant count rose by 26.5k in April after the 26.8k increase in March was revised to 4.9k. The unemployment rate, measured by the ILO, rose to 5.0% from 4.9%. Average weekly earnings, including bonus payments, rose 4.1% on the three-month year-over-year basis from a revised 3.9% in February. Private sector earnings, excluding bonuses, slowed to 3.0% from 3.2%. Tomorrow, UK reports April CPI. Due to the base effect, last April’s CPI jumped 1.2%, this drops out of the 12-month comparison, which will allow the year-over-year rates (headline and core) may slip. Despite some hawkish comments from BOE’s Greene, the swaps market discounts a little more than a 20% chance of a hike at next month’s meeting and it rises to almost 80% by the end of July.
• The record from the Reserve Bank of Australia’s meeting earlier this month when it hiked rates of third consecutive time this year reinforced the market’s sense that while the tightening cycle is not over, the central bank will standpat next month. The futures market has discounted one hike and around a 33% chance of another in H2 26.
• Japan reported it's economy grew by 2.1% at an annualized pace in Q1 26 after Q4 25 growth was cut to 0.8% from 1.3%. Consumption rose by 0.3%, a bit more than expected, but the consumption in Q4 25 was cut to flat from 0.3%. Government spending slowed (0.4% vs. 1.5%), as did private investment (1.1% vs. 5.6%). did capex. Inventories shaved 0.1% off GDP (-0.4% in Q4 25). Net exports contributed 0.3% after a flat Q4 25 contribution. The swaps market is pricing in almost a 78% chance of a hike next month, up from about 65% at the end of April.
Reviewed by Marc Chandler
on
May 19, 2026
Rating:
