The dollar exhibits a mixed performance against the G10 currencies, predominantly trading within narrow ranges. The New Zealand dollar, which surged yesterday following a hawkish hold by the central bank, stands as the strongest among the G10 currencies. It has increased by nearly 2% this week. Sterling and the Japanese yen represent the sole G10 currencies that have depreciated against the dollar this week. Japanese real sector data, encompassing retail sales and industrial output, exceeded expectations, whereas the Tokyo CPI experienced a decline, with the core rate reaching a four-year low. Official Japanese data revealed JPY11.7 trillion in intervention since late April, slightly exceeding expectations. Nonetheless, the dollar continues to hover near the JPY160 mark. The BOJ is perceived to have an approximately 80% probability of increasing rates in the upcoming month. Mostly firmer eurozone member May CPI supports the likelihood of an ECB hike next month, with approximately a 90% chance reflected in the swaps market.
The euro’s rebound in North America from a slight new five-session low yesterday was supported by reports indicating that a 60-day ceasefire extension had been reached, pending President Trump’s approval. Although oil recouped its initial losses, perhaps as many realised that the US president’s approval is the only thing missing for weeks, the euro maintained a significant portion of its gains, briefly surpassing $1.1660. Given the evident stagnation in developments and the pending US approval, the euro is stabilising within a narrow range of approximately one-third of a cent above $1.1625. Recall that the euro settled near $1.1730 at the end of April. We anticipate a constructive outlook for the upcoming month and expect the ECB to implement a quarter-point increase.
The dollar recorded a seemingly bearish outside down day against the yen yesterday. It fluctuated within Wednesday’s range and concluded beneath its low. Yet, it has remained virtually stagnant today. It is nearly a 20-point range above JPY159.20. Stronger than anticipated industrial production and retail sales in April have counterbalanced the weaker Tokyo CPI for May, reinforcing expectations for a potential rate hike by the Bank of Japan next month. The dollar concluded April at approximately JPY156.60. Sterling rebounded from an eight-session low, dipping slightly below $1.3370 yesterday, to attain $1.3450 amid a risk-on sentiment and a weaker dollar, following renewed optimism regarding a potential ceasefire in the Middle East. A close above $1.3455 would have constituted a more robust technical argument. It has retraced marginally beneath $1.3410 today, yet appears to be establishing support during the late European morning trading session.
The Canadian dollar recorded its most notable performance of the month yesterday. It rebounded after establishing a new low since April 10 and achieved the highest closing price in a week. The greenback reached CAD1.3870 and was making new lows in late North American dealings at CAD1.3775. The month-long US dollar rally appears to have concluded following the significant downside reversal observed yesterday. However, there was no follow-through today, and the greenback is consolidating within a narrow range (approximately CAD1.3780 to CAD1.3810). The Australian dollar exhibited a robust rebound yesterday as well. It had briefly slipped below 0.7100 for the first time in almost a week and a half in response to the softer than expected April CPI. It rebounded following the general decline of the US dollar, achieving a level of $0.7170, just shy of this week’s peak. It is trading quietly within a range of approximately $0.7150 to $0.7165.