After the close of an extremely tumultuous April that saw record highs in volatility across many currency pairs, the first day of May has brought with it a third straight session of Dollar positivity
Overview
The Buck is trading a touch stronger against most of its major peers. Through April, the Bloomberg Dollar Spot Index slid nearly 4%, led by huge gains for safe haven currencies as trader sought shelter from the fallout of President Donald Trump’s tariff talks.
The front-end impact of these trade policies was shown in a major way yesterday, as GDP for Q1 contracted while PCE inflation rose far more than expected, placing the first 100 days of Trump’s presidency in stagflation territory. This release, however, did not do the damage to the Buck that many expected. Given resurgent inflation readings, traders have dialed back their bets on easing from the Federal Reserve this calendar year, even in the face of a potential recession that former Treasury Secretary Janet Yellen said yesterday she has “not ruled out.” A first rate cut from the Fed is now not priced into markets until July, a step back from the June cut previously seen. When the Fed meets and releases its latest rate decision next week, markets will doubtless be looking for further insight into what the central bank believes may happen to the larger US economy in the coming months.
Though many of the world’s markets are closed today in observance of international Labor Day holidays, the US is open for business and released initial jobless claims this morning, higher than expected, which tracks with yesterday’s JOLTS job openings data coming in below expectations. The US still has non-farm payroll data for April coming tomorrow morning, which will be closely watched by traders especially ahead of the Fed’s decision next week.
What to Watch This Week…
- US Non-Farm Payrolls April, Friday 8:30
- Monex USA Online is always open
The complete Economic Calendar can be found here.
CAD ⇑
The Loonie has swung between gains and losses this week and is trading flat on the day, but through the month of April managed to post a gain of nearly 4% against the Buck. After it became clear that Canada would not face any additional tariffs from Liberation Day outside the pre-imposed 25% levies, CAD became a top performer through the month. USMCA tariff exceptions, as well, are set to continue. Nonetheless, Canada’s new Prime Minister Mark Carney, a former Bank of England official, struck a fairly aggressive “Canada first” tone in his speech following the Liberal party’s election victory earlier this week.
JPY ⇓
Japanese Yen is the biggest loser in the G10 this morning after the Bank of Japan held its key interest rate steady overnight. The central bank also, in this dovish release, delayed its target date for when it expects the nation will hit its target inflation rate to 2027, and cut its growth forecast for 2025 to 0.5%, down from 1.1%. As a result, JPY has slid more than a percent in early US trading from itsclosing price yesterday. Bank of Japan Governor Kazuo Ueda did, however, say that a delay in forecasted GDP growth to target does not mean that the central bank would delay any potential interest rate hikes coming down the line
