News that the US rejected Iran’s counter-proposal is set the tone for today’s session. The dollar is mostly firmer, though the Canadian dollar and Norwegian krone are slightly firmer. Equities are mostly lower, yields, higher, alongside oil. Appreciating the seeming reluctance of the US to renew “kinetic” operations, the North American market may view the US position as predictable negotiation tactics.
This week, US Treasury Secretary Bessent is in Tokyo. He has indicated that the weak yen is on the agenda. President Trump will be in Beijing later this week. The Trump-Xi meeting is highlight, and we have argued to keep expectations modest. Meanwhile, UK Prime Minister continues to fight for high political future after Labour’s drubbing in last week’s local elections. His speech earlier today does not appear to have done the trick. Sterling and Gilts are lower than before the speech.
Prices
G10
• Given the unexpectedly poor German industrial output figures and the first back-to-back gain in US nonfarm payrolls last April and May, the euro performed amazingly well before the weekend. It recorded session high into the close, slightly below $1.1790. After President Trump rejected the Iran’s counter-proposal, the euro fell about $1.1745 in early turnover today. It recovered to slightly above $1.1780 before stalling in Europe. There are 2.1 bln euros in options struck at $1.1750 that expire today and almost another 1.7 bln euros that expire there tomorrow.
• Despite the US jobs data and the bounce in oil prices, the yen held firm ahead of the weekend. It held below JPY157 though barely, even after the $620 mln options struck there rolled off. The greenback fell to session lows after the jobs data, near JPY156.45. It approached JPY157.20 today, a three-day high. The high for the day does not look to be in place but the market may be turn cautious closer to JPY157.40-50.
• Sterling and Gilts turned an impressive showing ahead of the weekend and after the Labour’s electoral drubbing. Sterling outperformed the euro slightly and the 10-year Gilts performed best in Europe at the end of the week when the yield fell by about four basis points. While sterling made a lower intraday high for the second session, it ended last week at its best level since mid-February, near $1.3630, set late in the session. Risk-off in early trading today saw sterling drop to $1.3550. But by early European turnover it reached almost $1.3615 before consolidating. No cabinet officials have resigned, and Prime Minister Starmer earlier today promised bolder domestic action and signaled a shift in foreign policy, putting the UK “at the heart of Europe” to strengthen the economy, defense, and energy security. Over the weekend, he brought back Gordon Brown (former PM and Chancellor of the Exchequer under Blair and Harriet Harman (deputy Labour leader under Brown), in part-time advisory roles. Initial support is seen near $1.3580. Sterling has forged support in recent days in the $1.3540-50 area.
• Poor Canadian jobs report and its contrast with the US weighed on the Canadian dollar, which fell for the third consecutive session and five of the last six. The US dollar tested the upper end of its three-week trading range, a little above CAD1.3700. The greenback settled above the 20-day moving average (~CA0D1.3670 today) for the first time in a month. Still, it is consolidating in quiet if choppy action today between about CAD1.3660 and CAD.3700. There are a little more than $5 bln in options struck at CAD1.3650 and CAD!.3660 that expire today.
• The Australian dollar reached almost $0.7280 middle of last week for the first time since June 2022. It consolidated for the next two sessions and successfully tested $0.7200 before the weekend. Still, it settled firmly near session highs, reached earlier in the North American session around $0.7250. However, amid the risk-off in early trading, the Aussie fell back to almost $0.7210. It recovered to almost $0.7250 in early European turnover. The consolidation looks constructive.
EM
• Mexico’s central bank cut interest rates last week shortly after April’s CPI (headline and core) were confirmed above the upper end of the 2%-4% target range. However, the peso was not punished. To the contrary, it rose to three-week highs before the weekend. The dollar was sold to MXN17.1920. After first rising through the previous session’s high, the dollar reversed and settled below above its low (~MXN17.1960). On an intraday basis it poked briefly through MXN17.1735. Last month low was near MXN17.1275. It is trading inside the pre-weekend range today and reached nearly MXN17.2550 before dollar sellers reemerged. It found support in the European morning near MXN17.18.
• The offshore yuan reached its best level in a little more than three years today, near CNH6.7910. Beijing’s intentions are being extrapolated from the PBOC’s fix and general dollar movement. There is little meaningful on the charts until closer to CNH6.70. The PBOC set the dollar’s reference rate at a new low today of CNY6.8467
• Prime Minister Modi’s electoral success has not alleviated the pressure on the Indian rupee. Higher oil prices and foreign sales of bonds and stocks continue to take a toll. The dollar rose to almost INR95.3165 today to approach the record high set last week near INR95.4375.
Other Markets
• Equities are mostly lower today. Japan indices themselves were mixed, while China’s CSI 300 gained almost 1.65%. South Korea’s Kospi jumped another 4.3% to bring this month’s gain to about 18.5%. Europe’s Stoxx 600 is nursing a small loss, which if sustained would be the third consecutive decline. US index futures are also slightly in the red.
• Tensions around Iran and the high oil prices are lifting yields today. European benchmark 10-year yields are mostly 3-4 bp firmer, while the 10-year Gilt yield is up seven basis points. The 10-year US Treasury yield is up a little more than three basis points to approach 4.39%.
• Gold was sold to a three-day low near $4648 today. It has steadied but still is heavy, below $4665. It settled around $4715 before the weekend. Silver is straddling the $80 area, confined to the pre-weekend range.
• June WTI poked above $100 on the initial rejection of the Iranian proposal but has since trimmed its gains. It is near $97.35 now, having recorded a low slightly below $97.
Data
• After the April jobs data and before the April CPI tomorrow, today’s US existing home sales will not have much impact. A small increase is expected as the series continues to alternate monthly between gains and losses. The sawtooth pattern began in November 2025. In March, the seasonally adjusted annual pace matched last year’s low (3.98 mln), which itself was the lowest since September 2024.
• Mexico reports April vehicle production and exports. In March, Mexico exported a little more than 90% of its production. Last week, Mexico reported that domestic sales dropped almost 10% in April and are off about 23% since the end of last year. Mexico auto sales show powerful seasonal patterns. April sales often (17 or 20 years) fall but have not failed in 20 years to recover in May.
• Earlier today, China reported that consumer price inflation rose to 1.2% from 1.0% in March. The core rate rose to 1.2% from 1.1%. It is the third month that CPI rose more than 1% on a year-over-year basis. And, at an annual rate, it rose by about 2.4% in the first four months of the year. Housing costs have been a drag for the past five months. Producer prices, which had been locked in deflation since Q4 22, rose to 0.5% in March and jumped to 2.8% in April, the fastest since July 2022. The swaps market had given up on ideas that the PBOC would cut rates this year since the early days of the war on Iran. Over the weekend, China reported its April trade surplus rose to $84.82 bln from $51.13 bln in March. In April 2025, its surplus was $95.88 bln. Through April, the surplus reached almost $350 bln compared with nearly $367 bln in the first four months of last year. Exports have risen by 14.1% year-over-year while imports have surged by 25.3%.
Reviewed by Marc Chandler
on
May 11, 2026
Rating:
