The US dollar is trading with a slightly firmer bias against most currencies today. New hostilities in the Middle East war have blunted the hopes of an extended ceasefire, but such skirmishes are not uncommon in such situations. On Polymarket, the odds that the Strait of Hormuz opens by the end of June was cut to about 45% from a peak of almost 60% at the end of last week. August Brent crude oil is paring yesterday’s nearly 6.8% drop but is still holding mostly below $97 a barrel. July WTI is a little below $92 after settling last week near $96.60.
Outside of the Middle East, the news stream is light and the North American response to the geopolitical developments will set the for the remainder of the session. Although the offshore yuan is nearly flat, the PBOC set the dollar’s reference rate at a new three-year low. The Reserve Bank of New Zealand meets first thing tomorrow and is expected to keep its target rate at 2.25%.
Prices
G10
• The euro was marked higher yesterday in early Asia Pacific trading amid optimism over a potential US-Iran deal. It finished last week slightly above $1.1600 and did not trade below $1.1620 yesterday. Despite reports of US-Iranian clashes, the euro is trading quietly today, holding above yesterday’s low. Last week’s high was a little north of $1.1660 and yesterday’s gains stalled in front of $1.1655. It returned to session highs near $1.1645 in subdued European turnover today. Options for 2.2 bln euros at $1.1650 expire today. A move above last week’s high runs into the next hurdle in the $1.1680-90 area.
• The dollar peaked last week near JPY159.35. It ended the week slightly below JPY159.20 and barely traded above JPY159 yesterday. It is trading firm today against the yen today and reached almost JPY159.25. It has held above yesterday’s low (~JPY158.75). Initial support is seen around JPY158.50-60, and a break could target the JPY158 area.
• Sterling poked above $1.3500 yesterday and reached a seven-session high (~$1.3510). It frayed the 20-day moving average but settled below it (~$1.3500 today). The (61.8%) retracement of this month’s losses is a little above $1.3520. A move above there could spur another half-cent gain near-term. Sterling is consolidating within yesterday’s range today and found initial support around $1.3465.
• In the soft US dollar environment, the Canadian dollar, as is often the case, the laggard. It rose less than 0.1% against the greenback, the least among the G10 currencies. The Norwegian krone, which is more sensitive to oil prices rose more than twice as much. The US dollar stalled before the weekend near CAD1.3825, and it held yesterday, while there was little selling below CAD1.38. Today it is trading quietly between about CAD1.3800 and CAD!.3815. Options for about $425 mln at CAD1.3785 expire today. The market showed little reaction to the heating up of US-Canada trade tensions as Canada hiked to 15% from 5% the amount of streaming services revenue that must go to local programming.
• The series of inside trading sessions, like a spring coiling, was challenged yesterday as the Australian dollar reached $0.7175, a three-session high. It has been confined to about a fifth of cent below yesterday’s high. Last week’s high was closer to $0.7185 and the 20-day moving average is a smidgeon above there.
EM
• Risk-on and a larger than expected trade surplus helped lift the Mexican peso yesterday to its best level in six sessions. The dollar settled near MXN17.3380 at the of last week and fell to MXN17.2440 yesterday. It is consolidating today between about MXN17.2725 and MXN17.3085. Nearby support is seen around MXN17.20.
• The US dollar’s broad setback saw it fall to a new three-year low against the offshore yuan yesterday of almost CNH6.78. As is widely recognized, despite the sustained dollar’s downtrend, the moves are quite modest. Yet, for the third time in six sessions the dollar fell by 0.20% or more, pointing to a small acceleration. It is trading quietly today inside yesterday’s range. The dollar’s low from early 2023 is the next big chart area (~CNH6.6975). The PBOC is still signaling its approval and set the dollar’s fix yesterday at a new three-year low (CNY6.8318) and slightly lower today (CNY6.8288).
• A combination of the short squeeze engineered by reports of heavy intervention last week and the pullback in oil prices helped extend the rupee’s recovery. The dollar reached a two-week low (INR95.1150) and settled below the 20-day moving average yesterday for the first time since April 20. Indian equities rally the most in six weeks yesterday. However, today, the rise in oil prices, a retreat in Indian stocks and bonds saw the rupee pullback. The US dollar recovered and filled the gap created by yesterday’s lower opening. The greenback settled at the session high, and last Friday’s low (INR95.6850).
Other Markets
• Asia Pacific equities advanced for the third consecutive session yesterday. It is the longest rally in more than a month. Profit-taking saw most bourses in the region slip today, with the notable exception of South Korea’s Kospi (2.55%) and China’s CSI 300 (~0.55%). Europe’s Stoxx 600 has a six-day rally, the longest advance in a year, is being threatened today. It is off about 0.3% ahead of the open of the North American session. US index futures are firm (~0.50%-1.0%).
• Benchmark 10-year yields dropped sharply yesterday. The 10-year JGB yield fell by almost 5.5 bp and the yield in the Antipodeans fell 4-5 bp. European benchmark yield fell 10-12 bp. Yields are firmer today. The 10-year JGB yield rose almost two basis points, and the Aussie 10-year yield is up three basis points. European yields are mostly 2-4 bp higher today. The UK market was closed for the bank holiday yesterday and the Gilts are playing catch-up today. The 10-year yield is off almost four basis points, while the 10-year US Treasury yield is down a little more than six basis points to slightly below 4.50%.
• Gold traded higher with risk-assets yesterday and briefly saw $4580, a four-day high. It has come back lower today. It was sold to almost $4512 and stabilized in the European morning. Silver briefly traded above $78.80 yesterday but could not get above $78.50 today and retreated to almost $75.65 in European turnover.
• July WTI gapped lower yesterday and fell to almost $89.40 before steadying. The gap—from last Friday’s low (~$94.75) to yesterday’s high (~$93.90) is important from a technical perspective. The risk of escalation in the Middle East war sent the contract to about $93.65 in Europe today.
Data
• There are two US features today. Surveys, which include the Chicago Fed’s April national activity survey, and the May Philadelphia Fed’s non-manufacturing survey, the Dallas Fed manufacturing survey, and the Conference Board’s consumer survey. The market seems more sensitive to the Conference Board’s survey. The US also sees March house prices. US house prices rose in H2 25 but have steadied in the first two months of 2026.
• Mexico reported April trade figures yesterday. The $4.5 bln surplus was considerably larger than any economist projection in Bloomberg’s survey. Through April, Mexico’s exports have risen by nearly 22% year-over-year. Imports are up almost 20%. The central bank’s inflation report is due tomorrow. These are nominal figures, which means a combination of price and volume changes. Note that the first bilateral negotiating round to review the USMCA was held yesterday.
• Australia reports April CPI tomorrow. Government support pushed gasoline prices to pre-war levels The spike in gasoline prices added one percentage point to the headline rate. The pullback in April could unwind around half of that. In addition, the base effect may also make for better comparison as last April’s 0.7% increase drops from the 12-month measure.
• India’s state-run gas stations lifted the price of gasoline and diesel for the fourth tine in 10 days yesterday. The latest move brings the cumulative increase to 7.8% for gasoline and 8.6% for diesel. Prices are at four-year highs.
Reviewed by Marc Chandler
on
May 26, 2026
Rating:
