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Where is GBPUSD Headed by The Savvy Trader How High Can a Surging GBPUSD Go? This week’s price action in the dollar has been choppy, lacking a clear one-way trend, but the broader tone has been decidedly negative. We opened the week near the highs and are closing near the lows, not an encouraging sign for dollar bulls. Watch GbpUsd A key currency to watch in this context is GbpUsd, which continues to test the upside and a key level around 1.3550. Sellers have consistently stepped in just below it, indicating it remains a psychological and technical cap for now. The market seems to be preemptively pricing in a potential pause but as discussed previously, a break through 1.3550 opens the door to 1.3600, 1.4000, and even 1.4200. Beyond that lies a much larger upside risk toward 1.5700, a level that would imply broader dollar weakness in the macro picture. Looking ahead, the upcoming Monday holidays in both the UK and the US could result in thinner liquidity and distorted moves. Additionally, month-end flows may introduce further volatility and directional ambiguity, as portfolio rebalancing distorts normal trading behavior. Watch GbpUsd 1.4000 options Meanwhile, options markets are flashing signs of increased tension. Implied volatility has been rising, and bank trading desks are reportedly active in GbpUsd call options around 1.4000. This positioning suggests some institutional players are preparing for a breakout although it’s worth remembering that for every option buyer, there is a seller. The market remains finely balanced between breakout potential and resistance defense. Keep in mind that while the dollar hasn’t broken decisively lower yet, the risk-reward increasingly tilts toward further weakness, especially if key resistance levels in crosses like GbpUsd give way. Keep an eye on volatility, upcoming data, and holiday-driven illiquidity, all of which could conspire to accelerate the next directional move. The Savvy Trader is a long-time, highly respected member of the global-view.com community GbpUsd Monthly Chart (added by global-view) Addenden added by global-view Why does GBPUSD have the nickname “Cable?” GBPUSD is called “Cable” because of the transatlantic telegraph cable that was laid in the mid-19th century to facilitate communication between London and New York. In 1858, the first successful transatlantic telegraph cable was laid between the UK and the US. This cable allowed for real-time transmission of financial data, especially currency exchange rates between British and American traders. Since GBPUSD was the most actively traded currency at the time and traders began referring to it simply as “Cable.” While many retail traders call GBPUSD the British Pound, professional traders often refer to it as Sterling or Cable. How High Can a Surging GBPUSD Go? Take a FREE Trial of The Amazing Trader – Click HERE

The Canadian dollar has steadied on Monday after surging 0.90% on Friday. In the European session, USD/CAD is trading at 1.3714, down 0.13% on the day. Earlier the Canadian dollar improved to 1.3686, its strongest level since Oct. 2024. US markets are closed for Memorial Day and there are no US or Canadian events, which likely will mean a quiet day for USD/CAD. Canada's retail sales boosted by auto salesCanada's retail sales impressed in March, rising 5.6% y/y, up from 4.7% in February and beating the forecast of 3.8%. Monthly, retail sales rose 0.5%, lower than the 0.8% in February but above the forecast of -0.1%. The strong gain was driven by a sharp rise in the sale of motor vehicle sales and parts. This was likely due to consumers buying cars before US tariffs took effect in April. Retail sales excluding autos posted a decrease of -0.7%, below the upwardly revised 0.6% gain in February and shy of the forecast of a flat reading. The decline will have the Bank of Canada worried and supports a rate cut at the June 4 meeting. The markets have priced in a rate cut at around 30%, with Canada's GDP the last key Canadian release before the rate announcement. The BoC will be keeping a close eye on developments in the US-Canada tariff war. If the tariffs between the two countries remain in effect, consumer confidence and spending will be negatively impacted. President Trump's trade policy has been unpredictable, making it difficult for BoC policymakers to make inflation and growth forecasts. USD/CAD Technical There is resistance at 1.3771 and 1.38321.3673 and 1.3612 are support levels close USDCAD 1-Day Chart, May 26, 2025 /media/images/USDCAD_2025-05-26_13-36-07.width-1400.png Opinions are the authors'; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please refer to the MarketPulse Terms of Use. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © {CURRENT_YEAR} OANDA Business Information & Services Inc.

If you’re asking, “Are gold coins or gold bars a better investment?“—you’re asking one of the most important questions in precious metals investing. The answer depends on your financial goals, investment timeline, liquidity needs, and risk tolerance. This updated 2025 guide compares gold bars and coins side-by-side to help you make the smartest decision. Gold has long been a popular option for investors seeking to diversify their portfolios and protect against market volatility. In addition, gold is often seen as a haven during economic downturns and a hedge against inflation. However, investors often face a dilemma when investing in physical gold: should they invest in gold bars or coins? What is the best size of gold to buy? The ideal size of gold to buy depends on your investment goals, budget, and storage options. Smaller gold bars and coins, such as 1 oz, 10 oz, or 100-gram bars, offer greater flexibility when liquidating your investment. In addition, these sizes are more easily divisible and typically carry lower premiums than larger bars or coins. Larger gold bars, such as 1 kg or 400 oz bars, may offer a lower cost per ounce, as they typically carry lower premiums than smaller bars or coins. However, they are less liquid, which may be more challenging to sell in smaller increments. This option may provide the most cost-effective investment for investors with a substantial budget who can securely store larger bars. Pros of buying gold bars Lower premiums: Gold bars generally have lower premiums than gold coins. This is because the production costs for bars are lower, and bars do not carry a numismatic or collector’s value. Larger sizes: Gold bars are available in a wide range of sizes, from 1 gram to 400 ounces. This variety allows investors to choose a size that best fits their investment strategy and budget. Purity: Gold bars typically have a higher content than gold coins, with most bars being 99.99% pure gold. This higher purity may attract investors seeking the highest gold content possible. Pros of buying gold coins Legal tender: Gold coins are often issued by government mints and carry a legal tender face value, which adds an extra layer of security to your investment. In contrast, gold bars are not considered legal tender. Collectability: Gold coins often feature unique designs, limited mintage, or historical significance, making them more appealing to collectors. This numismatic value can lead to a higher resale value for gold coins than gold bars. Smaller denominations: Gold coins are typically available in smaller denominations than gold bars, which makes them more accessible for investors with a smaller budget. Smaller denominations also provide greater flexibility when liquidating your investment. 2025 Price Snapshot: Bars vs Coins Product Avg. Premium Over Spot Approx. Price (June 2025) 1 oz Gold Bar 1.5% – 2.5% $3,545 1 oz American Gold Eagle 4% – 8% $3,675 Spot price as of May 2025: $3,232/oz Coins remain more expensive per ounce but offer higher resale flexibility. First-Time Investors For first-time gold investors, it’s essential to consider your investment goals, budget, and storage options before deciding between gold bars and gold coins. For example, if your primary objective is to invest in gold as a store of wealth and a hedge against inflation, gold bars may be a better option due to their lower premiums and higher gold content. Additionally, if you have a larger budget and secure storage options, gold bars offer a wide range of sizes to suit your investment needs. On the other hand, if you are interested in the potential collectability and numismatic value of gold, gold coins may be a better choice. Gold coins are also a better option for investors with a smaller budget, as they are available in smaller denominations and can provide greater liquidity when it comes time to sell. Which Is Better for a Gold IRA in 2025? Both bars and coins are eligible for precious metals IRAs, but: Bars are easier for large-volume IRA allocation. Coins like American Eagles and Maple Leafs are IRS-approved and easier to verify. If your IRA contribution or rollover exceeds $25,000, bars may provide better efficiency. For smaller balances or more flexible portfolios, coins offer better liquidity. How much is a 1 kg gold bar worth? The value of a 1 kg gold bar is determined by its Weight and the current market price of gold. To calculate the value of a 1 kg gold bar, you can use the following formula: Value = Weight (in ounces) x Gold Price per Ounce Since 1 kg is equivalent to 32.15 ounces, you would multiply 32.15 by the current gold price per ounce to determine the value of a 1 kg gold bar. For example, if the gold price per ounce is $1,800, the value of a 1 kg gold bar would be: Value = 32.15 ounces x $1,800/ounce = $57,870 Remember that the value of a gold bar can fluctuate daily as the market price of gold changes. It’s also important to consider any premiums or fees associated with buying and selling gold bars, as these can impact your overall return on investment. Investing in Gold Gold can provide a valuable addition to your investment portfolio, offering diversification, a hedge against inflation, and a haven during economic uncertainty. However, whether you choose to invest in gold bars or coins, it’s essential to consider the pros and cons of each option, as well as your investment goals and budget. Gold bars offer lower premiums, higher gold content, and a wide range of sizes, making them an attractive option for investors seeking a cost-effective investment in gold. However, they may be less liquid and need more numismatic value associated with gold coins. On the other hand, gold coins offer legal tender status, collectability, and smaller denominations, making them an appealing option for investors interested in the potential numismatic value and greater liquidity. However, they typically carry higher premiums and lower gold content than gold bars. There is no one-size-fits-all answer to whether gold bars or coins are a better investment. The best option for you depends on your investment goals, budget, and preferences. By carefully considering these factors and weighing the pros and cons of each option, you can make an informed decision that aligns with your investment strategy and helps secure your financial future. If you are interested in learning more about gold and other precious metals, American Bullion is a great resource. They offer a wide range of products and services, including gold and silver coins and bars, as well as IRA services. They also have a team of knowledgeable professionals who can help you navigate the market and make informed decisions about your investments. Contact American Bullion today to learn more about how you can diversify your portfolio with precious metals. The post Bars vs. Gold Coins, What’s The Better Investment in 2025? first appeared on American Bullion.

[Updated for 2025] If you’re wondering, “When is the best time to buy gold and silver?”—you’re not alone. It’s one of the most common questions investors ask, especially during times of inflation, economic uncertainty, or global tension. In this updated 2025 guide, we’ll break down seasonal trends, economic indicators, and expert strategies to help you time your precious metals investments wisely. Besides knowing who to trust when buying gold, every investor is eager to avoid unnecessary loss when purchasing precious metals like gold and silver. In order not to wreck your wallet when buying gold or silver, you need to consider your timing. The best time to buy gold and silver is what you should be capable of analyzing as an investor. Other times, investors also ask when and if they’ll receive reasonable prices later when they plan to sell. The fact is, observing historical records of gold and silver performances each year is the primary way you can ascertain the best buying times for gold and silver. According to financial experts, there are hints from yearly records of gold and silver to aid you in making the best buying decisions. We’ll address these issues carefully. While silver and gold are both liquid assets, both are commodities doomed to fluctuate in price. That’s why you should be careful to not buy at the worst times. The risk of huge loss is real- depending on how you invest in gold, precious either make you or break you. But do not fret- speculating the safer times to invest is almost effortless. 2025 Market Outlook: Gold & Silver Trends Metal Avg. Price Jan 2025 Mid-Year Price (June 2025) Trend Gold $2,280/oz $2,350/oz Bullish Silver $26.50/oz $28.10/oz Bullish Rising inflation forecasts, continued central bank purchases, and geopolitical friction (China-Taiwan, BRICS expansion) are all contributing to steady upward pressure on precious metals. Gold & Silver – Best Buying Seasons If you observe the historical performance of gold from 1975 through 2018, you’ll see that the price usually scales upwards during the first quarter of the year. Then during the summer, the price gradually falls. From late August to September, the price typically starts to rise continually to the end of the year. According to records, March is when you can buy gold the cheapest. The price still stays low throughout the second quarter of the year, making it the best time to buy gold. Here, look at the average performance of gold each month since 1975, when it was allowed to buy gold legally again. Judging from the gains and losses gold mostly encounters each month, the best times to purchase gold are at the very beginning of the year, March, or late April. As winter approaches, gold’s price typically surges. We used the same approach for silver, and it turns out the results aren’t far from that of gold. However, the price of silver is more volatile, and it has the potential to move upwards in percentage than gold. Silver’s volatility contributes to its smaller market, demand fluctuations from stores and industries, and lower market liquidity. The most dips in price happen in January, making it a good time to buy silver if you aim to spend little. After January, silver typically surges throughout the year. You can buy silver without pouring money down the drain around March and towards the end of June to July. These are the best times to buy silver. Seasonal Timing: Best Months to Buy Historical data shows that gold and silver prices tend to dip during certain months, offering smart entry points: Gold: Often weakest in March and June Silver: Tends to drop in June and November This doesn’t guarantee future results, but many investors use these patterns for cost averaging strategies. Take a look at silver’s historical performance since 1975. The Best Month To Buy Gold & Silver Is… There are many reasons to buy gold and silver, but don’t rush to buy because some moments can be unfavorable for purchase. Both gold and silver have a month in the year when it’s best to buy. Since it became legal to buy gold in 1975, on average, the month of March is when gold performs poorly on the market. This makes March the best month to buy gold. Silver is highly volatile; its price trends upwards and downwards quickly and randomly, but there is a time the price dips more, and it’s in June. This makes June the best month to purchase silver, followed by early January and August. More Factors To Consider There are other times investors watch out for when deciding the best time to buy gold or silver. Apart from considering the time of the year, investors should pay attention to the trends in other investments, monitor the gold and silver ratio, and watch out for bullish trends. Other Investments Investors usually make the most buying decisions during unstable financial conditions, when other Investments are shaky. It’s only normal that this happens since silver and gold perform opposite to paper currencies. So, it’s best to buy at these times to avoid losses from other Investments. You also have to stay heads up on economic news and watch the market for instabilities to avoid missing out on gold and silver updates in relation with other investments. Gold/Silver Ratio In simpler terms, the gold/silver ratio is how many ounces of silver makeup one ounce of gold. Therefore, how much silver you can use to buy gold. When the gold/silver ratio is high, it’s a good time to purchase silver as it can prove valuable. Conversely, when the gold/silver ratio drops, it’s the right time to pile up gold for future returns. Bullish Trends The emergence of a bullish trend or bull run is a characteristic of foreign exchange and the stock market. Many investors buy gold and silver in a bull market, so demand overpowers supply, and prices constantly rise. After the price rise, the trend is likely to decline and come back up again more valuable. In other words, it’s advisable to watch out for bullish trends and buy right before it starts or when it starts. When You Should Sell Gold & Silver Some people enjoy the benefits of buying physical gold and silver, and some others have no intention of selling them because they see them as a huge source of wealth to pass on to the next generation. Well, gold and silver, when properly invested in, are hedges and a safe haven for financial needs, so it only makes sense. Unlike other paper currencies, gold and silver have their inherent values and are not confined to government laws. Investing in precious metals means that you can come back to reap from your holdings whenever you need cash. Gold and silver bullion bars and coins shine amongst other investment assets due to their liquidity and universal acceptance. In times of financial emergencies or crises, they can provide a huge return when you sell them. Should it be that there is no crisis or financial difficulty, watch out for gold and silver worth in relation to other assets. If gold gets expensive, it’s a good time to sell your bullion. For most investors, selling can be a way to balance their asset portfolio while lowering. Generally, you’re likely to lock in the most profit when metal prices are appreciated. In investing, the intention is to buy low and sell high. The right time to sell: Desperate need for cash: As said before, gold and silver are excellent investment assets, so at bad financial times, selling them is the fastest way to raise adequate funds. In addition, when the economy is terrible, and markets and banks are inaccessible, gold and silver are one of the resolutions to get currency. Gold and silver form a large part of your portfolio: When gold and silver prices significantly increase, they form a huge part of your portfolio, tipping off the overall balance. To rebalance your portfolio, you might want to sell. When gold and silver escalate: When gold and silver prices exceed the average high, there is a chance they will get overvalued. This is around the time you can earn a whopping profit and reinvest when the price corrects itself. The Best Season To Sell Gold and Silver Since the best time to sell gold and silver is when prices are high, it’s paramount to know the season of the year prices skyrocket. According to records, the price of these metals starts to grow and stays high during the start of fall and winter, respectively. Prathamesh Mallya, the Chief Analyst of NACCAB, said, “The best way to say this, ‘if a winter is coming, silver prices head north.” Similarly, gold prices also trend upwards around the same time. The price of gold typically starts to rise from late July to the beginning of August and continually fluctuates till December. The best time in the year to sell gold is when the price is at its highest, which is in August or September. Below is a diagram displaying the performance of gold’s price each quarter of the year. Frequently Asked Questions Should I buy gold or silver? It depends. Both silver and gold have their quirks as the most valuable assets today. But, if you’re a first-timer or looking for the most affordable option, then silver may be your best grab. However, nothing is wrong with starting with gold- as long as you buy at the right time, they’re both going to yield profit anyway. Whether you invest in gold or silver, you’re off to a profitable investment. Is now a good time to buy gold? With the recent downward slope of the economy following the Coronavirus crisis, now is a good time to buy and secure your funds. As of January, the national debt was approaching $28 trillion, and topping it off; the Federal Reserve has spent trillions of billions into bringing back the economy after the pandemic hit. The dollar’s purchasing power is also low, and experts say it might even go lower, so you should secure your funds in gold and silver if you have the chance. Is buying both gold and silver safe? It’s okay to invest in both gold and silver as long as you can keep up with the two assets accordingly. Though it might be risky to invest in both at once if you’re a first-time investor, it isn’t always a bad idea. You can learn to manage the gold and silver you have in our portfolio with the proper enthusiasm, adequate management knowledge, and the help of a financial expert. Is 2025 a good year to buy gold or silver? Yes. With inflation hovering around 3.7%, elevated debt, and ongoing international conflicts, many experts see continued upside for metals. Should I wait for a dip in price? Maybe—but don’t wait forever. Many miss out trying to time the absolute bottom. Buying during dips and averaging in is usually a safer strategy. Is silver more volatile than gold? Yes, but it can also offer higher upside. Silver is more affected by industrial demand and speculative activity. What if I already own metals? Great! Use dips to add to your position. Rebalancing into metals when the dollar weakens is often wise. Waiting for the “perfect” moment may cost you more in lost opportunity than a few dollars in price swing. Gold and silver are long-term hedges, not day trades. If you’re financially prepared and strategically focused, then the best time to buy may be now. Contact American Bullion to set up your own Gold IRA. The post Best Time To Buy Gold And Silver in 2025 first appeared on American Bullion.

Trump’s Tariffs the EU’s Fragile Unity and the Bigger Forex Picture Understanding the EU and tariffs with forecasts for the EurUsd and UsdJpy by the Savvy Trader Trump’s Tariffs and The Bigger Forex Picture President Trump’s renewed frustration with the European Union has resurfaced in the form of aggressive trade policies. The latest one is a threat to impose 50% tariffs on EU imports. To some, this move may seem like a calculated strategy. But in reality, it reflects a misunderstanding of how the EU operates and the challenges of negotiating with a fragmented bloc. The Complexity of the EU: 27 Voices, One Bureaucracy Unlike a centralized nation-state, the EU is composed of 27 member states, each with its own interests, trade dependencies, and political agendas. This makes collective bargaining difficult, particularly when it comes to trade negotiations with a powerful counterpart like the U.S. In this scenario, Trump’s frustration is understandable but perhaps misguided. Rather than facing a single negotiating partner, the U.S. confronts a bloc with different trade relationships with America: The Netherlands imports more from the U.S. than any other EU country. Germany, on the other hand, is the largest EU exporter to the U.S. Other players like France, Ireland, and Slovakia have varying levels of engagement with American trade. The rest? They contribute relatively little to the transatlantic economic exchange. Could Trump’s Strategy Backfire? Trump, a self-styled dealmaker who often frames negotiation like a poker game, typically prefers one-on-one power dynamics by bluffing his way to leverage. But attempting to negotiate directly with individual EU countries would be not only be futile under EU law but also dangerously destabilizing. If such backchannel negotiations were to occur, they could trigger internal discord within the EU, potentially threatening its very fabric. Would that lead to the breakup of the European Union? It’s an extreme scenario but not an impossible one. A Breakup of the EU? Historical Lessons and Modern Risks When I spoke at Harvard in 1999, I made a long-term prediction: the EU would eventually disintegrate. At the time, I believed it might take centuries. Today, I’m not so sure. The EU has faced multiple existential tests: The Greek debt crisis Political instability in Italy The shock of Brexit Ongoing challenges with integrating Eastern Europe after the fall of the Berlin Wall Each time, the EU has managed to “put a finger in the dike”, containing the crisis just barely. So, can the EU withstand this latest geopolitical salvo? I still believe a breakup is a remote possibility in the near term. But the structure of the Union where power lies heavily in the hands of the original six members could eventually become its pressure breaking point. Market Implications: EurUsd and the UsdJpy Trade In the short-to-medium term (the next 12–18 months), I believe the “Sell USD” trade continues to be viable, particularly against the yen. My long-term thesis remains intact: A move down in UsdJpy toward 128–132 Followed by a potential surge above 200 Such a move could be triggered by a collapse in EurUsd, stemming from EU instability. Before any such dramatic breakdown occurs, however, we may first see: A test of 1.1746 in EurUsd (historically significant as the ECU-to-euro conversion rate) Then rallies toward 1.21–1.22, and possibly 1.26–1.27 Only after these levels are breached should traders start considering a doomsday scenario for the euro. EurUsd Monthly Chart (added by Global-View) UsdJpy Monthly Chart (added by Global-View) Trump’s tariff war with the EU may seem like a replay of previous tactics, but it taps into deeper structural vulnerabilities within Europe. While a breakup of the EU is unlikely in the short term, mounting pressure—political, economic, and strategic—could eventually lead to seismic shifts. The Savvy Trader is a long time and highly valued ,emeber of the global-view.com community Why You Should Treat Forex Trading as Being in Episodes Not Trends Take a FREE Trial of The Amazing Trader – Click HERE

Between its trade war and the "big, beautiful budget", which is both regressive and adds on more debt, the US has roiled the capital markets. Before the weekend, the US said the EU was not negotiating in good faith. President Trump threatened a 50% tariff as of June 1. This looks harsher than the current state of play with China. Europe's Stoxx 600 was sold, and it suffered its biggest loss since April. He also called for a 25% tariff on Apple and Samsung smartphones. Benchmark 10-year yields fell 5-8 bp. The euro itself dropped about two-thirds of a cent but recovered to settled around 0.7% higher on the day and posted its first weekly gain since the week ending April 18. Among the currencies we track closely, the British pound, Canadian dollar, Mexican peso, and Chinese yuan made new highs for the year ahead of the weekend. Meanwhile, the world's two largest bond markets remain under pressure. Japan's 30-year bond yield rose for the fourth consecutive week, gaining about 35 bp to 3.05%. The 40-year bond yield rose for the seventh consecutive week. Its yield is up almost 100 bp to 3.55%. April's CPI was reported ahead of the weekend at 3.6%. The US 10-year and 30-year yields rose for fourth consecutive week. The former yield is up nearly 25 bp to about 4.50%, while the yield of the latter has risen around 35 bp to a little above 5.0%. What is often missed in the discussions is that the rise in long-term rates can be fully accounted for by the reassessment of the overnight rate. The implied overnight rate in the Fed funds futures for the end of the year has risen by about 40 bp over the past four weeks. US Drivers: The market has pushed out the next Fed cut until Q4, but this did not translate into a firmer dollar. We continue to hypothesize that given the extent of the uncertainty, or what has been spun as "strategic ambiguity," means that many market participants demand a higher US interest rate premium to hold on to dollars. Data: The US has a busy economic calendar in the last week of May. We are well aware of the emphasis that Fed officials are placing on real sector data, which it suggests has yet to see the weakness that has been picked up in the survey data. This would seem to dampen the market's reaction to survey data, and there are several such data points in the coming days, including the Conference Board's measure of consumer confidence, the final University of Michigan May survey, and the Dallas and Richmond Fed surveys. Real sector data include April durable goods orders and April personal income and consumption data. Of note, Boeing orders fell dramatically in April to eight from 196, which will weigh on the headline figure. Personal income and consumption data will factor into Q2 GDP projections, while the thunder for the deflators has been stolen by the CPI and PPI. The core PCE deflator looks flat at 2.6% year-over-year. Prices: The Dollar Index made a marginal new low for the month ahead of the weekend slightly below 99.00. President Trump's social media message that he was going to "recommend" a 50% tariff on imports from the EU as of June 1 helped it stabilize. The squeeze higher stalled near 99.60 and set session lows late in the North American session. It lost nearly 2% last week to end a four-week advance with prejudice. The momentum indicators have turned down and the five-day moving average crossed below the 20-day moving average. The uptrend line off last month's lows was violated in the middle of last week. A break of the 98.85 area warns of a retest on the three-year low set in April slightly below 98.00. EMU Drivers: Europe seems to be one of the chief beneficiaries of the diversification out of dollar assets. Speculators in the futures market have their largest net long euro position (~75k contacts, 125k euros per) since last September when the 2024 high was set around 100k contracts. Good euro buying emerged on the pullback that approached the (61.8%) retracement of the gains since late March found near $1.1050. Data: The eurozone sees confidence surveys at the start of the week and the ECB's inflation survey. Germany and Spain report April retail sales, and France reports consumer spending. But the highlight of the week is that the four largest members of the EMU report April CPI figures ahead of the aggregate estimate on June 3. Barring a significant surprise, the market will continue to look for another ECB rate cut at the June 5 meeting. Prices: The euro posted its first weekly increase since the weekend ending April 18. The upticks stalled ahead of the weekend near $1.1380, which is the (61.8%) retracement of the losses from the April 21 high (~$1.1575) to the May 12 low (~$1.1065). US President Trump's 50% tariff threat knocked the euro back to around $1.1300 were buyers emerged. The euro's gains came despite the widening US two-year premium over Germany, which often tracks the exchange rate. It reached 220 bp at the end of last week, the highest since mid-February. The momentum indicators are constructive, and the five-day moving average crossed back above the 20-day moving average. A move above the $1.1380 area targets $1.1575 and maybe $1.1685. PRC Drivers: The yuan is a closely managed currency. Officials have let the yuan appreciate to new highs for the year against the dollar. Still, the yuan's appreciation is among the least in Asia. The onshore yuan has risen by about 1.7% against the dollar this year, while the offshore yuan has appreciated by around 2.3%. The PBOC has eased monetary policy but without more fiscal support, the 5% growth target may be difficult to achieve. Data: China reports industrial profits on May 27. Despite being a huge manufacturing center, profits tend to be weak in China. Chinese companies, with access to patient capital, are more concerned with securing market share than profits. In contrast, American businesses that rely on impatient capital (bonds and stocks over bank loans) typically pursue short-term profits. China reports its May PMI early on May 30 (Saturday). Prices: The broad weakness in the US dollar saw it pressed to new six-month lows before the weekend to almost CNH7.1700. There is little to hang one's hat on from a technical perspective until the CNH7.1460-CNH7.1500 area. The dollar fell for the fifth consecutive week against the onshore yuan and approached CNY7.18 at the end of the last week. A break of this area would suggest technical potential toward CNY7.1380-CNY7.1400. Japan Drivers: While the exchange rate's sensitivity (30-day correlation) with the US 10-year yield remains at the lower end of where it has been in the last couple of years (~0.25), its correlation with the changes in the US two-year yield is near 0.50, which is the upper end of the three-year range. On occasion, it has reached 0.80. Still, even more impressive is that the changes in the exchange rate and changes in the Dollar Index have a little more than a 0.90 correlation over the past 30 days, which appears to be the highest since the mid-1990s. Data: After reporting a small contraction in Q1 GDP, attention shifts to Q2 GDP and the April employment, retail sales and industrial production will help shape expectations. More important for expectations for the Bank of Japan and Japanese interest rates may be Tokyo's May CPI. Recall that elevated April figures, which saw the headline CPI rise to 3.5% from 2.9% and the core jumped to 3.4% from 2.4%. There were several factors that will not be repeated, including the low base effect from the waiver of school tuition, the start of the new fiscal year, and an unexpected increase in rents. Prices: In the last nine sessions, the dollar has risen twice; once by about 0.02% and once by a little less than 0.25%. It has fallen by about 4% over those nine sessions to nearly JPY142.40. It approached the month's low (~JPY142.35) was recorded on May 6. Still, last week, the dollar snapped a four-week advance. The momentum indicators have turned lower, and the five-day moving average is below the 20-day moving average. Nearby support is seen around JPY142.00, but the risk may extend to the JPY140 area, which was tested in April, September 2024, and December 2023, without settling below it. UK Drivers: UK officials are in a bind. The stronger than expected Q1 growth (0.7%) and the jump in April CPI would seem to allow the Bank of England some latitude in the next rate cut. Yet, both are overstated, and both growth and prices are expected to moderate going forward. This will compound the fiscal challenge Chancellor Reeves will likely face in the Fall. At the same time, Prime Minister Starmer's support is at a new low according to the recent YouGov poll, and he spent precious capital to outflank Farge's Reform Party on immigration, to the dismay of many in his Labour Party. Starmer secured a limited trade arrangement with the US, which surrendered some sovereignty to the US in exchange for a carve out of 100k vehicle exports. Its attempt to re-set its relationship with the EU by focusing on defense and security issues falls victim to the cherry-picking criticism often levied against it. The US threat of a 50% tariff on the EU gives the UK a competitive advantage, but a weak EU is not in the UK's interest. Sterling settled little changed against the euro despite the volatility around the President Trump's social media posting of the potential tariff on the EU. Data: The UK's data in the coming days features the CBI surveys and Nationwide house price index. These tend not to be market-movers. Meanwhile, the swaps market has lifted the year-end base rate projection to about 3.80% (4.25% currently), which is the highest since early April. Prices: Firm core and services inflation, followed by stronger than expected UK retail sales lifted sterling to almost $1.35, i40ts best level since February 2022. That said, its 1.9% gain against the dollar last week put it in the middle of the G10 performers. A note of caution is that sterling settled above its upper Bollinger Band ($1.3485). But the momentum indicators are moving higher, and the five-day moving average is about 20-day. The next chart resistance is not until the $1.3630-50 area. As UK rates have risen against Germany, sterling has recouped previous ground lost against the euro. The euro has fallen around 4% against sterling since reaching an 18-month high on April 11 near GBP0.8740. It is finding support near the 200-day moving average (~GBP0.8385). Canada Drivers: The Canadian dollar appears more sensitive to the broad direction of the greenback than risk, or oil. It has not been sensitive to changes in US or Canadian short-term interest rates. The rolling 30-day correlation of changes of the Canadian dollar and the Dollar Index is around 0.72, the highest for the year. Changes in Canadian dollar is most often inversely correlated with the S&P 500 (a proxy for risk). However, over the past 30 sessions, there is a positive correlation (~0.25). It happened late last year for the first time since November 2021. Data: Canada reports March and Q1 GDP at the end of the week. It is difficult to go from the monthly GDP figures to the quarterly. In Q4 24, the monthly GDP prints were a cumulative 0.4%, but the quarterly GDP was 2.6% at a seasonally adjusted annual rate. In January, the economy expanded by 0.4% and contracted by 0.2% in February. The median forecast in Bloomberg's survey for Q1 25 GDP is 1.8%. The importance of the data may lie with the central bank's response. Following the elevated underlying core inflation readings, the swaps market downgraded the chance of a rate cut at the next central meeting (June 4) to about 25% from slightly less than 60% at the end of April. Still, the year-end target rate is seen near 2.40%, up from around 2.20% at the end of last month. Prices: The US threat of a 50% tariff on the EU saw the Canadian dollar bought on the news. The greenback was trading near CAD1.3830 and was sold to CAD1.3750 by the time Europe closed shop for the week. It took another leg down in the NY afternoon, falling to about CAD1.3710, a new seventh month low. A break of CAD1.3700 area could target the CAD1.3600 area but we suspect there is potential back to last September's low near CAD1.3420. The momentum indicators have are moving lower and ahead of the weekend, the five-day moving average fell below the 20-day moving average. That said, the greenback settled below its lower Bollinger Band against the Canadian dollar (~CAD1.3735). Australia Drivers: The Reserve Bank of Australia cut its cash target rate by 25 bp last week, as widely expected. The next cut is fully discounted for August (not the July meeting, for which the futures market is pricing in a 2/3 chance). The exchange rate may be more influenced by the performance the greenback's general direction, and especially against the Canadian dollar, than the macro data. Over the past 60-sessions, changes in the Aussie are as correlated with the S&P 500 as China's CSI 300 (~0.50). Data: It is unreasonable to expect the RBA to cut rates at back-to-back meetings, which means this week’s data may not be so consequential. Moreover, officials put more weight on the quarterly CPI figures than the monthly estimate, and April's will be released this week. The central bank has been concerned about the strength of domestic demand. Australian consumers slowed their shopping in Q1 25. Retail sales rose at an annualized pace of 3.6%, down from 4.8% in Q1 24. On the other hand, private credit growth rate hardly changed in Q1 25 from Q1 24, remaining near a 5.8% annualized pace. The April reports are due in the coming day. The Reserve Bank of New Zealand meets early on May 28 and is expected to cut its cash target rate by a quarter-point to 3.25%. It began cutting rates last August from 5.50%. The terminal rate is expected to be between 2.75% and 3.0%. Prices: The Australian dollar recovered from weakness early last week that frayed the $0.6400 area. It recovered to knock on $0.6500. It settled strongly near session highs and above the down trendline (~$0.6485), drawn the two highs this month above $0.6500. The momentum indicators and moving averages are constructive. A move above the $0.6515 high from May 7 targets $0.6550 next. Mexico Drivers: Over the past 60 days, the main considerations for the peso seem to be the general risk appetite and oil prices. The correlation of changes of the peso and the S&P 500 reached a two-year high near 0.60 earlier this month and is now a little above 0.50. The correlation of changes of the peso and WTI is also near 0.50, which is around the most since early 2020. Data: The central bank's inflation report (Wednesday) and minutes from the recent meeting that resulted in a half-point cut and suggestion that more cuts of a similar magnitude may be delivered (Thursday) are the highlights of the week. The central bank is clearly more concerned about growth than inflation, especially given even with the overnight cash target rate at 8.5%, monetary policy remains restrictive with inflation near 4%. Although Banxico recently cuts this year's growth forecast to 0.6% (from 1.1%), it may still be optimistic. The IMF's forecast, by contrast, is for a contraction of 0.3%. Prices: MSCI's emerging market currency index rose for its sixth consecutive week. During this run, it rose by around 3.6%. JP Morgan's emerging market currency index rose for seven consecutive weeks, during which time it has risen by about 3.6% as well. In the past seven weeks, the dollar has fallen by about 5.8% against the Mexican peso. The greenback reached a new seven-month low against the peso near MXN19.2350 ahead of the weekend. Dollar-funded carry trades are popular with LATAM currencies (leaving aside the Argentine peso), while in East Asia, boosting short-dollar hedge ratios seem to be the driver, especially in Taiwan and South Korea. Note that South Korea's central bank meeting concludes on May 29, and it is likely to result in a quarter-point cut of the base rate to 2.50%. It has cut rates three times in the cycle that began last October. April CPI (headline and core) was slightly above 2.0%. The terminal policy rate is seen between 2.25% and 2.50%. Disclaimer

Newsquawk Highlights include Nvidia earnings, FOMC Minutes, US PCE, RBNZ, Australia CPI and OPEC JMMC Newsquawk Week Ahead: 26th-30th May 2025 MON: US Holiday (Memorial Day), UK Holiday (Bank Holiday) TUE: NBH Policy Announcement; German GfK (Jun), French Prelim. CPI (May), EZ Consumer Confidence (May), US Durable Goods (Apr), Dallas Fed (May) WED: RBNZ Policy Announcement, FOMC Minutes (May), Riksbank Financial Stability Report, OPEC JMMC; Australian CPI (Apr), German Unemployment (May), US MBA (w/e 19th May), Richmond Fed (May), Nvidia (NVDA) earnings THU: Swiss & Scandinavian Holiday (Ascension Day), BoK & SARB Policy Announcements; US GDP 2nd (Q1), PCE (Q1), Initial Jobless Claims (w/e 24th May), Pending Home Sales (Apr) FRI: CBRT Financial Stability Report; Japanese Tokyo CPI (May), German Import Prices (Apr), CPI Prelim. (May), EZ M3 (Apr), US PCE (Apr), Personal Income/Consumption (Apr), Chicago PMI (May), Canadian GDP (Q1) NVIDIA EARNINGS PREVIEW (WED): Nvidia reports quarterly earnings on Wednesday, 28th May, at 21:20BST/16:20EDT, and while obvious attention will be on the quarterly figures and guidance, participants will be cognizant of what is said about China-US relations and chip bans. In recent remarks, and since China/ US agreed to lower tariffs on each other, CEO Huang warned of “tremendous loss” as export controls limit US access to China’s market. In separate comments, Huang said the US tightening of chip export controls has a significant impact on Cos. business, and it will resolutely provide services to the Chinese market. Numerically, Huang expects USD 5.5bln in charges in Q1 FY26 related to H20 products as the US informed the co. it requires a licence to export to China. Ahead of the metrics, KeyBanc expects the tech-behemoth to report a more modest upside to Q1 results and Q2 (July) guidance due to the headwinds associated with the AI China chip ban and continued supply constraints associated with GB200 NVL72. However, KeyBanc does believe that Nvidia plans to ramp up another China-compliant GPU that does not use HBM, which should partially offset the impact of this ban. NVDA is still targeting 30k GB200 racks for the year, but KeyBanc is increasingly worried about the ability to achieve this. As a result, KeyBanc is fine-tuning its near-term estimates, which previously had already reflected the impact of the AI China ban and is trimming its H2 ʼ26 estimates to reflect continued supply constraints related to GB200 production. Looking at the expectations, Q1 EPS is expected at USD 0.92 with revenue printing at USD 43.09bln. Looking at the breakdown, Data Centre is seen at USD 39.07bln, Gaming 2.82bln, Automotive 595mln, Professional Visualization 505mln, and OEM and other 120mln. Regarding some other key metrics, the gross profit margin is expected at 71% and operating expense at 3.6bln. In terms of forward guidance, the next quarter’s (Q2) revenue is seen at USD 46.59bln, with EPS of USD 1.01. RBNZ ANNOUNCEMENT (WED): RBNZ is expected to lower rates for the sixth consecutive meeting next week with money markets pricing in a 91% probability that the central bank will cut the OCR by 25bps to 3.25% and with just a 9% chance for rates to be kept unchanged at the current level. As a reminder, the RBNZ lowered the OCR by 25bps to 3.50% at the last meeting in April, as unanimously forecast and which the central bank had pre-signalled, while it noted at that meeting that a further reduction in the OCR is appropriate and as the extent of tariffs becomes clearer, the Committee has scope to lower the OCR further. RBNZ also stated that global trade barriers weakened the outlook for global growth and that having CPI close to the middle of the target band puts the committee in the best position to respond to developments. Furthermore, the minutes from the meeting stated that future policy decisions will be determined by the outlook for inflationary pressure over the medium term. It stated that the monetary policy response to tariffs will focus on the medium-term implications for inflation but added that the implications of increased tariffs for global and domestic inflation are more ambiguous. The rhetoric from officials since then has continued to highlight trade and tariffrelated uncertainty as RBNZ Governor Hawkesby noted that the threat of a trade war has decreased recently but there is still considerable uncertainty about how things will play out and that supply-side impacts from tariffs could impact New Zealand significantly. RBNZ Chief Economist Conway also commented that higher tariffs and uncertainty about global trade policy mean economic activity globally and in New Zealand will most likely be weaker than expected and that the balance of risks had shifted to the downside. As such, the central bank is expected to continue with its current rate-cutting cycle to support the economy amid the ongoing global trade uncertainty, while the recent key data releases since the last meeting have been mixed and therefore are unlikely to derail the central bank from its current path. FOMC MINUTES (WED): The FOMC left rates unchanged at 4.25–4.50%, as expected, with a unanimous vote. The statement noted that uncertainty around the economic outlook has increased further and added that “risks of higher unemployment and higher inflation have risen”. The Fed repeated its March language that economic activity continues to expand at a solid pace, though net export swings have affected the data. It maintained its view that inflation remains somewhat elevated and labour market conditions are solid, with the unemployment rate stabilising at a low level. The key changes centred on increased uncertainty and the risks on both sides of the dual mandate. In his press conference, Chair Powell reiterated that the Fed is well-positioned to respond as needed and remains in a “wait-and-see” stance. On tariffs, he noted they have been larger than anticipated but have yet to show major effects in the data, though concerns remain. Powell said the Fed will adjust policy as the economy evolves, balancing dual mandate goals by assessing how far and how fast each side may drift from target. He declined to specify which side is at greater risk and stressed the Fed is in no rush but can act quickly if necessary. Note, the minutes of the meeting are an account of information that was available to them at the time of the meeting on 7th May 2025, therefore it will not incorporate the recent deescalation on trade with China. Try Newsquawk free for 7 days OPEC JMMC (WED): OPEC+ will convene its Joint Ministerial Monitoring Committee (JMMC) on Wednesday ahead of the full ministerial meeting on June 1st, with delegates reportedly discussing the prospect of a third consecutive output hike, according to Bloomberg sources. Sources suggest a potential 411k BPD increase for July is under consideration — three times the originally scheduled monthly hike — although no final decision has yet been reached. The move would maintain Saudiʼs recent strategy of accelerating supply additions in an effort to enforce discipline on members exceeding quotas. At the last meeting, Saudi Arabia issued a firm warning to overproducing nations, threatening further output increases unless compliance improves. AUSTRALIAN CPI (WED): Markets expected the monthly CPI indicator at 2.3% Y/Y (prev. 2.4%). Westpac is forecasting a 0.3% rise in the April Monthly CPI Indicator – which will take the annual pace down to 1.9%. Australiaʼs CPI data will be closely watched following the RBAʼs expected 25bps rate cut earlier in May, which brought the Cash Rate to 3.85%. The RBA noted that while inflation is moderating, the outlook remains uncertain, with the risks to inflation now seen as more balanced. The cut was accompanied by a downgrade in global growth forecasts and trimmed domestic core inflation projections in the central bankʼs quarterly update. The Q1 CPI print showed headline inflation at 2.4% Y/Y, steady from the prior quarter, while core inflation fell into the RBAʼs 2–3% target band for the first time since 2021, at 2.9% Y/Y. However, price pressures remain in non-discretionary items like electricity, food, health, and education, which drove a 0.7% Q/Q rise in core CPI. A softer April print would validate the RBAʼs dovish tilt, supporting expectations for two more rate cuts in H2 2025, as per market pricing. Conversely, stickier inflation in key components could complicate the easing path. At the May meeting presser, Governor Bullock revealed that the board discussed cutting by 25bps or 50bps. BOK ANNOUNCEMENT (THU): The Bank of Korea will conduct a policy meeting next week to decide whether to maintain rates at the current level of 2.75% or resume its rate-cutting cycle following the surprise contraction in South Koreaʼs economy during Q1. As a reminder, the BoK kept its base rate unchanged at the last meeting in April, as expected, with the rate decision not unanimous as board member Shin Sung-Hwan dissented and saw a need to respond to the worsening economic outlook. BoK noted that uncertainties to the growth path were higher and headwinds to economic growth were seen to be bigger than previously expected, while it will determine the timing and pace of any further base rate cuts and stated the monetary easing policy stance is to continue. BoK Governor Rhee revealed that most board members saw lower interest rates in the three months ahead and that they will factor in the interest rate differential with the US for the next rate decision, as well as assess in May whether the policy rate needs to go below 2.25% by year-end. Furthermore, Rhee acknowledged that first-quarter growth is likely to be significantly lower, partly due to the recent domestic political crisis, and they couldnʼt rule out the possibility of the economy contracting in Q1 with the uncertainties to the growth path higher and headwinds to economic growth were seen to be bigger than previously expected. As such, the contraction in the economy materialised with Advanced GDP for Q1 QQ at -0.2% vs. Exp. 0.1% (Prev. 0.1%) and YY at -0.1% vs. Exp. 0.1% (Prev. 1.2%), which supports the case for the central bank to resume its easing cycle. TOKYO CPI (FRI): There is currently no consensus for the Tokyo CPI release, which is seen as a leading indicator to the National CPI typically released a couple of weeks later – the data will be closely watched as a leading signal for national price trends. ING expects inflationary pressures to remain broad-based, with core CPI likely rising slightly amid steady headline inflation. The data comes at a delicate time for the BoJ, which faces mounting policy complexity due to sticky inflation and weakening industrial output, the latter pressured by recent US auto tariffs. US PCE (FRI): Aprilʼs CPI and PPI data suggest core PCE inflation softened in April. Core CPI rose +0.2% M/M, below expectations for +0.3%, while core PPI unexpectedly fell 0.4% M/M. Together, they imply the core PCE deflator increased by just 0.12% M/M (prev. 0.0%), according to Pantheon Macroeconomics, bringing the annual rate down to 2.5% Y/Y from 2.6%. For the headline rate, Fed Chair Powell has predicted that April PCE was likely around 2.2% Y/Y (vs 2.3% in March), albeit this did not incorporate the latest PPI report. The deceleration in Core PCE largely reflects sharp PPI drops in portfolio management prices, which is heavily weighted in the PCE calculation. Looking ahead, core PCE inflation is still expected to peak between 3.0% and 3.5% later this year, Pantheon writes, assuming current tariffs persist. It says that while tariffs may add around 1ppts to goods prices, this is likely to be offset by easing services inflation, driven by softer rental and labour cost pressures. As the inflationary impact of tariffs appears contained and profit margins absorb some cost increases, markets expect the Fed to cut rates by 50bps this year. Fed officials have been cautious on giving any outlook updates amid the uncertainty, but the influential Governor Waller has argued again that he does not see much from tariffs to suggest that inflation will rise persistently, again noting that the Fed can look through one-time effects; this view was also echoed by others recently, including the Fed’s Vice Chair Jefferson, and Musalem, while some – Like Fed’s Bostic — suggest that inflation expectations are troubling. CANADA GDP (FRI): Canada’s March 2025 and Q1 2025 GDP will be released on Friday. The March data will likely start to show the immediate effect of tariffs on the Canadian economy, given tariffs on Canada came before Liberation Day, a 10% tariff on Energy and Potash, and a 25% tariff on Steel and Aluminium. US President Trump also implemented a 25% tariff on all non-USMCAcompliant goods, but the actual imposition was not implemented until April (outside of Q1). Nonetheless, given Canada was subject to certain tariffs in March, and the announcement was expected – an impact will likely start to be seen in the data. The data will likely help shape expectations for the June BoC meeting. Recent inflation data was hotter than expected, and money markets have started to price a 25bps rate cut in June with less certainty. Initially, the hot inflation data saw pricing ease from a 60% probability of a 25bps rate cut to a 50% probability, with now just a 30% probability of a 25bps rate cut at the next meeting. A slowdown in the economy could bolster the case for another 25bps rate cut, which would take the BoC rate below the 2.75% midpoint of the BoC’s neutral rate estimate (2.25-3.25%). The BoC paused in April and continued to provide no guidance due to the uncertainties ahead. However, Governor Macklem did note they are prepared to act decisively if incoming information points clearly in one direction. It is also worth noting that the Minutes of the meeting found that the council was split on whether to cut or hold. Those who favoured a cut, cited near-term inflation risks and signs that the economy was weakening. A sign of a further slowdown for the upcoming GDP data would likely bolster the case for a cut at the upcoming meeting, although the hot inflation may see others prefer to hold once again Copyright © 2025 Newsquawk Voice Limited. All rights reserved. Registered Office One Love Lane, London, EC2V 7JN, United Kingdom · Registered Number 12020774 · Registered in England and Wales. newsquawk.com · +44 20 3582 2778 · info@newsquawk.com Join GTA for FREE – Click HERE

Overview: The dollar is finishing the week heavily. It is off against nearly all of the world's currencies. The only exceptions are the Turkish lira and Hong Kong dollar. For the week, among the G10 currencies, only the Australian dollar has not risen at least 1%, Helped by stronger than expected retail sales, sterling set a new three-year high (~$1.3500). Between the tariffs and the budget, the Dollar Index is set to snap a four-week upside correction, even as the market has pushed the next cut by the Federal Reserve into Q4. Asia Pacific equities mostly rallied, except for China, Taiwan, and South Korea. Europe's Stoxx 600 is little changed on the day and week. US index futures have a slightly heavier bias. The S&P 500 ended a six-day rally and has a three-day downdraft in tow coming into today. Bonds enjoy a bid today, including the long-end of the Japanese curve, despite the firm April national CPI. European benchmark yields are 1-2 bp lower and the 10-year US Treasury yield is off a little more than a basis point to 4.51%. Gold is firm, though within yesterday's range. It is near $3330 after settling last week slightly above $3200. July WTI reversed lower from $64.20 in the middle of the week and, at yesterday's lows, was $4 lower. It is consolidating quietly today and is hovering near $61.00. USD: The Dollar Index was already recovering before the stronger than expected preliminary PMI, but it helped extend the gains even as yields counter-intuitively fell. It rose for the first time this week yesterday and resurfaced above 100.00. However, again Asia and Europe sold it and DXY is trading fraying support near the week's low set Wednesday a little below 99.35, which is also roughly the (61.8%) retracement of the rally from the April 21 low (~97.90). It is set to snap a four-week advance. The US reports April new home sales today, and after the heady 7.4% jump in March, the biggest gain in five months, economists expect a pullback. A 4% decline, which is what the median forecast in Bloomberg's survey anticipates would being the seasonally adjusted annual to 695k, which would be about 5.5% lower than in April 2024. It is not typically a market-mover. Nor is the KC Fed's services survey. Next week's highlight include durable goods order, for which a sharp slowing of Boeing orders will weigh on the headline though shipments jumped. The April PCE deflator will also be released. The CPI and PPI suggest there is scope of an inconsequential slight slowing, depending on the rounding. EURO: The euro peaked Wednesday near $1.1380, (61.8%) of the decline in the past month. It was turned back yesterday and fell to almost $1.1255 in North America and has recovered back to almost $1.1355 today. And the five-day moving average is crossing back above the 20-day moving average. It settled slightly below $1.1165 last week, which was the fourth consecutive weekly decline that followed a four-week advance. The move is about the dollar more broadly, but it did not hurt that Germany's Q1 GDP was revised to 0.4% from 0.2%, helped by stronger consumption and investment. The negotiated wage indicator may draw some attention ,but the significance is marginal. The 2.4% year-over-year rise in Q1 25 follows a 4.1% increase in Q4 24. The fact of the matter is that barring a significant surprise, the ECB is set to cut rates at its June 5 meeting, at which growth and inflation projections will likely be reduced. ECB President Lagarde has suggested that the neutral rate (r*) is around 1.75% and that is where the market expects the deposit rate to be by the end of the year (2.25% now). Late today, Moody's is set to announce its review of Italy's sovereign rating. It has been on negative watch at the lowest investment grade rating (Baa3, which is equivalent to BBB-). S&P assigns it a BBB+ rating with a stable outlook and Fitch says Italy is a BBB rating with a positive outlook. Next week's economic diary consists of mostly surveys and money supply/lending figures. CNY: The dollar recovered from a four-day low yesterday near CNH7.1940 and was knocking against CNH7.2050 by the end of the session. The greenback has been sold to new six-month lows today near CNH7.1745. The next important technical area may be CNH7.1460-CNH7.1500. The PBOC set the dollar's reference rate at CNY7.1919 (CNY7.1903 yesterday and CNY7.1938 a week ago). There are two broad models of competition. The Anglo-American model, for which companies depend on the capital markets, compete for profits. This is the key to securing lower cost capital from the impatient investors. What is sometime called the Rhine model, but includes Japan, as well, relies more on bank lending. The access to more patient capital encourages competition for market share. China, with its extensive state-own companies, is more the latter. April Industrial profits are due next Tuesday. In March, profits had risen 2.6% year-over-year. In March 2024,they have fallen by 3.5%. On May 31, China's PMI is scheduled for release. The risk is on the downside. JPY: The dollar broke that three-day downdraft against the yen yesterday, rising for the first time this week, despite the large decline in the US 10-year yield since last Thursday. It has been falling since peaking on May 12 near JPY146.85. Selling pressure re-emerged today ad pushed the dollar back to JPY143.15, to bring yesterday's low near JPY142.80 back into view. The US CPI and PPI steal the thunder from the Fed's inflation target, the PCE deflator. The eurozone's preliminary CPI steals the thunder from the final estimate. In Japan, Tokyo's CPI is usually a good indicator of the national figure. Tokyo's April CPI was reported on April 25 and it showed a large jump (3.5% vs 2.9% headline and 3.1% vs. 2.2% core). The national headline figure converged with Tokyo's at 3.6% (unchanged from March) and the core rate stands at 3.5% (up from 3.2%). The swaps market has about 15 bp of tightening discounted for this year, slightly less than a week ago and practically flat since the end of last month. At the end of next week, Tokyo's May CPI will be reported alongside the April industrial production and retail sales. The bigger story in Japan is the dramatic jump in long-term bond yields. This is the fourth consecutive week that the 30-year bond yield rose. It has risen by about 35 bp during the advance and has approached German levels (3.02%-3.11%). Japan's 40-year bond yield has risen for the seventh consecutive week and is up around 93 bp to almost 3.55%. The strain on Japanese banks seems minimal and the Topix index of bank shares has risen for the third consecutive week. It is up a nearly 11.5% over these three weeks. Japanese insurers may be more exposed to the ultra-long end and the five-week, nearly 17% rally, ended this week with a 3.1% pullback. GBP: After setting three-year highs on Wednesday (~$1.3470), sterling consolidated firmly and spent most of yesterday's session above $1.34. In fact, it was the strongest of the G10 currencies and settled barely higher on the day. The greenback's heavier tone and stronger than expected UK retail sales have lifted sterling today to $1.35. It may be of psychological importance by the next chart resistance is in the $1.3650 area. April UK retail sales jumped 1.2% (in volume terms) well above expectations and after March's 0.4% increase was revised to only 0.1%. That means that through the first four months of the year, UK retail sales have risen by a little more than 9.5% at an annualized rate. In the Jan-Apr 2024 period, UK retail sales rose an annualized rate of a little more than 5%. With the rise in core CPI and services, coupled with the robust retail sales, the swaps market is pricing in a less aggressive path for the Bank of England. It sees the year-end base rate near 3.82%, the upper end of what it has been since early April and about 32 bp higher than seen at the end of last month. The UK has a light economy calendar next week. CAD: The US dollar consolidated quietly yesterday between about CAD1.3850 and CAD1.3890, though edged slightly higher to snap a three-day losing streak. It has been greeted by sellers that have driven the greenback to a marginal new low for the week, a little closer to CAD1.3800. needs to got off the CAD1.38-handle to be of any importance. The low for the year was set earlier this month near CAD1.3750. Lifted by the strongest auto sales in the month of March since 2018, the Bank of Canada estimated that overall retail sales rose by 0.7%. This seems likely to have been an attempt to get ahead of the US tariffs. Excluding auto sales, retail sales may have fallen by 0.1% (after rising 0.5% in February). While the Bank of Canada may look through it, the decisive development this week was the firmer than expected core CPI measures. The market downgraded the likelihood of a cut next month (June 4) and, in fact, does not have the next cut fully discounted until September. Next week's highlight is the first estimate of Q1 GDP. The median forecast in Bloomberg's survey is for a 1.8% annualized pace (down from 2.6% in Q4 24). Here in Q2, the median forecast sees the risk of a contraction, and stagnation in Q3. AUD: The Australian dollar settled poorly yesterday, below Wednesday's low. But it remains within the broad consolidation range that has dominated since the middle of last week, roughly $0.6385-$0.6470. It is trading near the upper end of that range, having reaching nearly $0.6465 in Europe today. Last week's high was near $0.6500. Australia's economic diary is quiet until the middle of next week's monthly inflation report. The Reserve Bank of Australia's delivered 25 bp cut this week and revealed that it had considered a half-point move. The odds of a cut at its next meeting in July jumped from a little less than 25% to around 60%. The overnight cash target rate is at 3.85% and the swaps market sees it near 3.15% at the end of the year, or slightly more than 15 bp lower than a week ago. MXN: The dollar peaked yesterday near MXN19.46 after the firmer than expected CPI for the first half of May. The headline rate shot to 4.20% (from 3.90%), and through the upper end of the target range for the first time this year. The core rate held barely below the 4% cap. Even as the greenback recovered against the euro and yen yesterday, it fell back below MXN19.30, making the lows late in the session. It has been sold to almost MXN19.2550 so far today. The low from earlier this week was closer to MXN19.25. The dollar carry-trade is in vogue and we still see potential toward MXN19.00-MXN19.10. We suspect, and look for confirmation, in next week's central bank report, in which it may revise its growth forecast again. Remember it recently cut in half to 0.6%. But, this still may be optimistic. The IMF, for example, projects a 0.3% contraction. The peso's resilience was again demonstrated. Mexico's trade surplus will be reported shortly. It tends to narrow sequentially in April and it is expected to have done so last month. Mexico's March surplus, which was almost three-quarters larger than the March 2024 surplus was likely flattered by attempts to get ahead of US tariffs. Disclaimer

Overview: Disappointing flash May PMI readings in Europe and the Asia Pacific helped the US dollar stabilize after yesterday's drop. Asian currencies, including the yen, has been unsettled by reports that in bilateral trade discussions with the US, exchange rates have been discussed. This, coupled with extensive unhedged dollar exposure rocked several of the regional currencies in recent weeks. Yesterday's 1.6% surge of the South Korean won has been mostly though not fully unwound today. The dollar has edged lower against the Taiwan dollar for the third consecutive session today, and the sixth time in the past seven sessions. The greenback is higher against the all the G10 currencies today but the Japanese yen, which has also been impacted by fx-related talks. Following the sharp US equity losses yesterday, Asia Pacific bourses tumbled today. Indonesia was the notable exception, and the rupiah, incidentally, is the strongest currency in the world so far today, rising by about 0.4% against the US dollar. Europe's Stoxx 600 is off nearly 1%. It would be the first back-to-back loss in the index in two weeks. US index futures are slightly firmer. Japanese bonds remain under pressure, and European benchmark yields are mostly have edged higher. After yesterday's surge, US two- to 10-year yields are 1-2 bp lower. Gold reached a nine-day high near $3345 before falling back to new session lows a little below $3305. July WTI spiked to nearly $64.20 yesterday amid report that Israel was considering a strike on Iran but reversed slow and settled near $61.35. Confirmation that OPEC+ was still planning on continuing to boost output may have encouraged follow-through selling today to around $60.40, where the 20-day moving average is found. USD: The Dollar Index was sold through 99.50 yesterday, which is the (6.18%) retracement of the bounce from the three-year low set April 21 (~97.90). The bounce itself stalled near 102.00, a little ahead of the (6.18%) retracement of the losses from the late March high (~104.70). It is consolidating quietly but firmly between about 99.45 and almost 99.85 so far today. Resistance is seen in the 100.00 area. Still, the five-day moving average will fall back below the 20-day moving average today or tomorrow, and the momentum indicators have begun curling lower. Meanwhile, the fear of financial stress and the cracks beginning to appear in the labor market may become more salient. The US labor market is gradually slowing. The three-month average non-farm payroll increase was below the six-month average for the third month in a row in April. Job growth in the first four months of the year is almost 20% less than the same year ago period. Today's weekly jobless claims may draw some attention. The four-week moving average of weekly initial jobless claims is at its highest level since last October and the four-week average of continuing claims is at the highest for the year. The cooling of immigration, the government lay-offs, and the weak tourist bookings underscore the risk of continued slowing. Given Fed Chair Powell's contrast of weak survey data and more resilient real sector data, the preliminary May PMI is unlikely to have much impact. April existing home sales are expected to bounce back after falling nearly 6% in March. EURO: After stalling near the 20-day moving average on Monday and Tuesday, the euro pushed through it (~$1.1280) yesterday and traded above $1.1360. The $1.1380 area is the (61.8%) retracement of the decline from decline from the $1.1575 area seen late April, which was the best level since November 2021. The momentum indicators are turning higher, and the five-day moving average is poised to shortly cross back above the 20-day moving average. But the euro is trading heavier today and new session lows have been recorded in late European morning turnover near $1.1290. Support is seen in the $1.1265-80 area. The preliminary May PMI disappointed. It showed the eurozone manufacturing continues to contract (49.4 vs. 49.0). It is the fifth consecutive month of improvement, but it has not been above the 50 boom/bust level since June 2022. More disappointing was the service sector. The preliminary PMI fell back below 50 (to 48.9) for the first time since last November. It was the fourth decline in the five months of the year and the largest of the year. The high for the year was set in January (51.3). The composite PMI was also dragged below 50 (to 49.5). It was at 52.2 in May 2024. In Germany, both the manufacturing and services PMI remained below 50 (48.8 and 47.2, respectively) and the composite (output) fell below 50 (48.6), the lowest of the year. Separately, Germany's May IFO survey saw a continued improvement in expectations (highest since last May), but the current assessment weakened for the first time in three months. France's manufacturing and services PMI also remained below 50 even though both edged up. The preliminary composite reading rose to 48.0 from 47.8. That matches this year's high. The market continues to be confident that the ECB will cut rates again when it meets early next month. CNY: After reaching a six-day high near CNH7.2265 on Tuesday, the dollar's broad weakness pulled it back to slightly below CNH7.20 yesterday. Follow-through selling initially took it to CNH7.1940, a six-day low. It recovered to new session highs near CNH7.2080 in the European morning as the greenback found better traction more broadly. The PBOC set the dollar's reference rate at CNY7.1903. That was 0.05% lower than yesterday's (CNY7.1937), which is the largest change in over a week, and the lowest dollar fix since April 3. The lower reference rate limits the dollar's upside/yuan's downside. JPY: The dollar fell against the for the third consecutive session yesterday and the sixth time in the past seven sessions. It extended its losses initially today to around JPY142.80, a new two-week low. The early denial that US Treasury Secretary Bessent and Japan's Finance Minister Kato did not discuss exchange rate levels, while acknowledging current levels reflected fundamentals, lifted the dollar to session highs near JPY144.40 but the gains were unwound and the greenback was sold to JPY142.80 in early European turnover. It recovered quickly but appears to be stalling around JPY143.50. The momentum indicators have turned down and the five-day moving average is crossing below the 20-day moving average today. The markets tend not react much to Japan's PMI, but for the record the preliminary manufacturing PMI edged up to 49.0 from 48.7. It has not been above 50 since May-June 2024. The services PMI weakened to 50.8 from 52.4. It was at 50.9 at the end of last year. The composite stands at 49.8 (51.2 in April). The sharp sell-off in long-term JGB yields is causing some consternation but not on Japanese bank shares. The Topix index of bank shares collapsed by 37% from late March through early April, but it has rallied strongly and has overshot the (61.8%) retracement target. It is up almost 40% from the lows. Insurance companies are thought to be more exposed to very long end of the Japanese curve. The index of Topix insurance companies crashed by more than a quarter in late March-early April swoon. It too recovered smartly but has begun falling again. It was off today for the fourth consecutive session and has lost more than 4% this week. The 40-year bond yield has risen by about 90 bp in the six-week advance coming into this week and it is up another 22 bp this week. The 30-year yield was up about 65 bp over the past six weeks and is up about 22 bp so far this week. GBP: Sterling reached a new three-year high yesterday near $1.3470. The five-day moving average crossed above the 20-day moving average on Tuesday, and the momentum indicators have turned higher, but had not reached over-sold territory. A consolidative tone has emerged today. A break of the $1.3370 indicates a near-term corrective phase. The UK's preliminary May manufacturing PMI ticked down to 45.1 from 45.4. It has not been above 50 since last September. The services PMI had slipped below 50 in April (49.0) for the first time since October 2023 but returned to 50.2 in the preliminary May reading. However, the composite remained below 50 (49.4 vs. 48.5) for the first back-to-back sub-50 reading late 2023. The composite was at 53.0 in May 2024. CAD: The US dollar fell for the third consecutive session against the Canadian dollar, its longest losing streak in a little more than a month. The greenback fell to about CAD1.3815, matching the May 8 low. It is held above CAD1.3845 earlier today and is testing the 20-day moving average in Europe near CAD!.3885. Yesterday's high was near CAD1.3920 and a move above it helps lifted the technical tone. Still, the daily momentum indicators are set to turn lower. AUD: The Australian dollar fully recovered from the losses suffered at the hands of the dovish central bank. It reached a five-day high yesterday near $0.6470. A trendline off those two highs is near $0.6485 today. It is trading with a softer bias today but within yesterday's range (~$0.6415-$0.6470). It found support at the end of last week and earlier this week slightly below $0.6400, though last week's low was near $0.6355. The momentum indicators are not inspiring but broadly consistent with the consolidation that has dominated this month. Australia's manufacturing PMI rose every month in Q1 25 before slipping in April to 51.7 wand was unchanged in the flash May reading. The services PMI has been eased to 50.5 in May from 51.0 in April. It has not been below 50 since January 2024. The composite PMI ticked down to 50.6 from 51.0 in April. It finished last year at 50.2 and was 52.1 last May. MXN: The dollar rose against the Mexican peso for only the fourth time this month. We suspect the sharp losses in the US equity market took a toll on the peso. Over the past 30 sessions, changes in the peso are about 0.60 correlated with the S&P 500 and are greater than the G10 currencies. It rivals the Brazilian real, which posted a small gain against the dollar yesterday. The peso's roughly 0.5% loss was the most among emerging market currencies. Mexico updates its Q1 GDP estimate (initially 0.2% quarter-over-quarter) today and the March IGAE economic activity report is due, which is similar to a monthly GDP estimate. They will be overshadowed by the CPI for the first half of May CPI. The year-over-year headline rate may rise above 4% (the upper end of the target range) for the first time this year. The core rate may hold a whisker below the threshold. Given the economic weakness, the firmer CPI is unlikely to impact expectations that Banxico will likely cut the overnight rate by another 50 bp when it meets next on June 26. Disclaimer

Why a Ukraine-Russia Ceasefire Could Trigger a Short-Term EURUSD Rally and What Could Limit It So How a Ukraine-Russia Ceasefire Could Impact EURUSD Exchange Rate With President Trump pushing for Ukraine and Russia to meet and discuss peace, global attention is turning toward the possibility of a ceasefire. While a comprehensive peace agreement remains uncertain, even preliminary talks would mark a significant shift in tone. Let’s assume the two sides finally sit down at the negotiating table and discuss a pause as a first step. What would a ceasefire mean for the EURUSD? A Brief History of the Russia-Ukraine Conflict To understand market reactions, it’s essential to revisit the roots of the war: February 2014: Russia annexes Crimea following Ukraine’s Revolution of Dignity. Russian support follows for separatists in Ukraine’s Donbas region. February 24, 2022: Full-scale Russian invasion of Ukraine begins, Europe’s largest conflict since World War II. As of May 2025: Conflict continues, with Russia controlling approximately 20% of Ukrainian territory. How a Ceasefire Could Move the EURUSD Assuming a headline announces a Ukraine-Russia ceasefire, the EUR/USD would likely rally, at least in the short term and here’s whyL Why the EURUSD Could Rally Easing of Geopolitical Risk in Europe A ceasefire would signal de-escalation in a hotspot directly linked to Europe. Lower geopolitical risk typically boosts the EURO by encouraging foreign investment and reducing the risk premium on European assets. Improved Eurozone Economic Outlook Trade routes through Eastern Europe could reopen and Ukraine’s grain/agriculture exports could resume Peace could reduce energy supply concerns in Europe, easing inflation and helping Eurozone economic growth. A rebound in trade and lower energy costs would be positive for European businesses and consumers. ECB policy response is uncertain although it would remain dovish if inflation falls, even as growth improves. Shift in Safe-Haven Flows The U.S. dollar benefits during geopolitical crises although its safe haven status this has been somewhat impacted by fallout from Trump’s tariffs. A credible ceasefire would likely reverse any lingering safe haven flows and boost the EURUSD. . Trump’s recent tariff-driven trade policy has already complicated USD’s safe-haven appeal, further amplifying potential EUR gains. EURUSD DAIKY CHART (no clear signs of ceasefire optimism) Why the EURUSD Rally Might Be Short-Lived Ceasefire Credibility Skepticism will remain high due to past ceasefire failures and this should keep markets cautious. Any violations or breakdowns or the risk of such in a ceasefire could quickly reverse gains in the EURUSD. Will the U.S. Economy Stay Resilient? Much will depend on whether expectations of a weaker economy and higher inflation materialize and how the Federal Reserve responds. This will influence the value of the EURUSD in its role as the anti-dollar. U.S. data and how resilient the economy will be once the impact of tariffs kick in will help set the overall U.S. dollar tone, especially if it keeps the Fed cautious while the ECB stays dovish. Buy the Rumor, Sell the News” If markets anticipate a ceasefire due to diplomatic momentum, much of the EURUSD rally could already be priced in. A formal ceasefire might trigger profit-taking rather than a fresh rally. A Conditional Bullish Scenario A Ukraine-Russia ceasefire, particularly one brokered or facilitated by Trump, would be EURUSD bullish in the short term BUT only if seen as credible. However, the sustainability of any rally depends on follow-through peace efforts, energy market reactions, and how both the ECB and Fed respond to shifting economic conditions. Traders should watch the following: Ceasefire announcement language and verification safeguards. Any shifts in market sentiment in Eastern Europe. Energy prices and inflation data. ECB and Fed expectationsfollowing any diplomatic breakthroughs. Take a FREE Trial of The Amazing Trader – Click HERE

Overview: The greenback is under pressure. It is off against nearly all of the world's currencies after falling in North America yesterday. Reports that Israel may be planning a strike against Iranian nuclear facilities has contributed to the broad risk off moods and helped lift July WTI to new highs since early April. While the greenback is not benefiting from the risk-off, gold has extended its gains to about $3300. Still, the dollar is off its lows and North American leadership is await. While equities were mostly higher in the Asia Pacific region, Europe's Stoxx 600 is snapping a four-day advance. It is off nearly 0.5%. The S&P 500 ended a six-day rally yesterday, and US index futures are off around 0.75%. Bond markets are not offering a haven today. European benchmark 10-year yields are up 6-8 bp and the 10-year US Treasury yield is up five basis points to 4.54%. Monday's high in response to the Moody's downgrade before the weekend was closer to 4.56%. The US Treasury auctions $16 bln 20-year bonds today, and the demand for this tenor is not typically as for the 10-year or 30-year. USD: It is as if Monday's buying in the North American session, following the sell-off in Asia and Europe ostensibly on Moody's downgrade, exhausted the dollar bulls. They were unable to match the strength yesterday and returned toward the session lows near 100.00 in late dealings. It was sold to almost 99.40 today, a two-week low in early European trading. It recovered to around 99.80 where sellers pounced. Support is seen in the 99.00-25 area. It must close above 100.00 to stabilize. EURO: The euro held support near $1.1220 in the North American session yesterday and by late trading it had recovered to set a marginal new session high near $1.1285, which is around the 20-day moving average, as well. It reached nearly $1.1355. It pulled back in early European turnover and found support near $1.1310. The next technical target may be the month's high near $1.1380, which is also the (61.8%) retracement of the decline from the April 21 high for the year (~$1.1575). CNY: The dollar was turned down from the CNH7.2265 area, overshooting marginally the 200-day moving average and the (61.8%) retracement of the losses since the May 9 high (~CNH7.2528). It tested the CNH7.20 area, which held initially. A consolidative tone is threatened. The PBOC set the dollar's reference rate at CNY7.1937 (CNY7.1931 yesterday). JPY: The dollar fell to a fresh eight-day low yesterday around JPY144.10 and settled below the 20-day moving average (~JPY144.60) and below Monday's low (~JPY144.65). It took out JPY144.00 before finding support slightly below JPY143.50. Nearby support is seen near JPY143.25, though more formidable support may not be found until closer to JPY142.00. There are reports suggesting that in the trade talks the US is seeking a stronger yen. Turning to Japanese trade balance, in 2023 and 2024, it reported a cumulative trade deficit of about JPY15 trillion. It recorded a bilateral surplus with the US of about JPY17 trillion. The April figures released earlier today showed an overall deficit of nearly JPY116 bln deficit. The median in Bloomberg's survey anticipated a JPY215 bln surplus. Export growth slowed on a year-over-year basis (2% vs. 4%), while imports fell 2.2%. Japan may be one of the countries that US Treasury Secretary Bessent warned would face April 2 "Liberation Day" tariffs if there are not negotiations in good faith. Japan was the first to begin negotiations with the US, but the talks seem to have stalled. Japan wants all the tariffs on the table, including the auto tariffs, but that is not what the US is offering. Moreover, Prime Minister Ishiba has seen his support dwindle and there is an upper house election in late July, after the 90-day postponement of the so-called reciprocal tariffs. GBP: Yesterday, the Bank of England's chief economist warned against easing policy too quickly and today the UK reported a surge in CPI. It helped lift sterling to a new three-year high near $1.3470 before being taken a little below $1.3400 where new bids were waiting. The jump in household utility bills fueled the largest rise in the UK CPI in two years. The 1.2% increase in April was larger than all of Q1 25 (~0.6%). The Bank of England may have been able to look through it, but core prices rose 3.8% year-over-year, up from 3.4% in March and 3.2% at the end of last year. Service prices are 5.4% higher from a year ago. They finished last year up 4.4% year-over-year. The swaps market has the next cut fully discounted for November and has about 36 bp of cuts this year priced in compared with 41 bp yesterday and 45 bp at the end of last week. Meanwhile, tomorrow, the May flash composite PMI is seen below the 50 boom/bust level for the second consecutive month. It was above 50 all of 2024. CAD: The greenback consolidated in the lower end of the recent trading range, which was established on May 12 (~CAD1.3895-CAD1.4015). It has been pushed to CAD1.3880 today. The 20-day moving average is near CAD1.3885, which is also the halfway point of the rally since the May 6 low (~~CAD1.3750). The next retracement (61.8%) is near CAD1.3850. The end of the carbon tax saw the headline CPI fall 0.1%, and given the base effect, the year-over-year rate fell to 1.7% (from 2.3%). This was a little firmer than the Bank of Canada projected. And perhaps more importantly, the underling core measures were more than expected (averaging 3.15% vs 2.85% in March). The market more than halved the odds of a June rate cut to about 1-in-4. Meanwhile, a 10-day rally has lifted the Toronto Stock Exchange Index to a record-high. It is the longest streak since 2021. The index is up a modest 5.3% year-to-date. AUD: The Australian dollar traded below $0.6400 yesterday in response to what was perceived to be a dovish cut by the central bank. However, the broader pullback in the US dollar helped it recover to almost $0.6425 in the NY afternoon. The gains have been extended to almost $0.6460 today. The week's high, set Monday, near $0.6465, offers initial resistance. It pulled back to around $0.6435 in early European turnover. A close below $0.6425 would disappoint the late longs. MXN: The peso extended its gains yesterday to new seven-month highs. The greenback reached almost MXN19.25. Recall, last Friday's high was near MXN19.5660. The peso finished higher yesterday, the 11th session in the 14 this month. Yesterday's resilience persisted even after news reports of more political violence (two aides of Mexico City Mayor Brugada were killed). Mexico reports March retail sales today. The dollar is consolidating in a narrow range (~MXN19.26-MXN19.3050), as it waits for North American leadership. With Q1 GDP already reported, today's report is unlikely to have much impact. That said, retail sales are expected to slip (-0.1%) for the first time since last October. Tomorrow's reports are more important, especially the CPI for the first half of May. Disclaimer

Human vs. System Human vs. System: Can Emotion-Free Trading Bots Really Deliver More Consistent Results? Ask any seasoned trader what derails trades the fastest, and most won’t say “bad analysis” or “wrong indicator.” The answer’s almost always the same: emotion. Fear of losing. Greed for more. The urge to win back what was lost. These reactions turn strategy into chaos, and over time, they drain accounts faster than any market dip ever could. It’s easy to follow a plan when everything’s calm. But in the middle of a fast moving market, logic slips. You start seeing threats that aren’t there, or chasing moves that have already nhappened. That moment, where the plan breaks and emotion takes over, is where most traders go wrong. And it’s also where systems have the edge. The Human Problem Humans are wired for survival, not trading. That’s why even traders with solid plans find themselves skipping entries, bailing early on winners, or doubling down on losses they should’ve walked away from. Missed setups, overtrading, revenge trades-most of it stems from emotional decisions that feel urgent in the moment but make no sense in hindsight. You see price moving fast? Your brain floods with panic. You just took a loss? Now you want it back. These reactions aren’t flaws. They’re human. But in trading, they’re expensive. What Bots Bring to the Table This is where structured, algorithmic trading systems come in. Most trading bots operate using pre-set rules based on technical indicators, like moving averages, RSI, or candlestick formations. These rules are triggered when specific market conditions are met. That’s automation. Pivozon takes it further by layering AI-based filtering on top of those rules. It doesn’t just follow signals, it evaluates them. It can analyze recent price behavior, filter out setups that look unstable, and prioritize trades with stronger probability. ForexEKO is more pattern-based, relying on chart structure and price formations. It identifies when a breakout setup is forming and aligns entries with key levels. The logic is clean, consistent, and not influenced by past outcomes. That’s something very few humans can match, especially under pressure. Bots don’t care about your last trade. They don’t trade out of frustration. They just follow the rules, and that level of consistency can change the outcome across an entire trading month. When the Market Goes Wild Let’s say you’re watching Gold during a heavy news cycle, during a major economic release or central bank announcement. The candles spike, retrace, spike again. As a manual trader, that kind of movement is hard to sit through. You either jump in too early or pull out too soon, especially if the last few trades didn’t go your way. Now picture the same scenario with a bot running. Pivozon’s in a trade that still meets its conditions. It holds. No second-guessing. No reacting to the noise. If the conditions break, it exits. If they don’t, it rides the move. That calm, mechanical behavior is exactly what most traders struggle to maintain on their own, and it’s where bots excel. Over 20 trades, the bot follows the same logic every time. A human, depending on mood or confidence, might only follow through on half. That difference adds up fast. The Missing Piece That said, bots aren’t foolproof. They don’t read sentiment. They don’t adjust for breaking news or unexpected events unless they’re programmed to stop during them. A system might still take a trade right before a major release. Not because it’s reckless, but because it doesn’t know any better. That’s where the human eye still matters. You know when to pause the bot. You know when to avoid high-impact events or tweak parameters based on current conditions. Bots don’t replace you, they support you. They take the emotion out of execution, but you still need to steer the bigger picture. The best results often come from a hybrid approach: structure from the system, judgment from the trader. That combination offers both stability and flexibility, something no fully manual or fully automated setup can provide on its own. So, Do Bots Deliver Consistency? Yes, but with a caveat. Bots offer consistency in execution, not perfection in outcome. They’re ideal for traders who want to remove impulse and bring structure into their routine. They don’t chase trades, and they don’t tilt after a loss. That alone can change the entire trading experience, especially for those building discipline. Used smartly, bots aren’t just tools. They’re a safeguard against your own worst instincts. Not because you’re weak, but because no one trades well in panic mode. Systems like Pivozon and ForexEKO give you space to trade clean, even when the market doesn’t.

Overview: US stocks and bonds recovered from yesterday's sell-off in Asia and Europe. The Swiss National Bank President Schlegel expressed the views of many Americans when he said on Monday that "There is currently no alternative" to US Treasuries, "and it's not foreseeable that there will be an alternative." The 10- and 30-Treasury yields finished 3-4 basis points lower, stocks closed higher. Yet the tug-of-war continues, and the dollar was sold again in Asia Pacific and Europe today. Among the G10 only the Antipodean currencies are weaker, following Australia's dovish rate cut. Emerging market currencies are mixed. Following the weekend elections, the Romanian leu is the weakest (~-0.75%), while the Polish zloty is the strongest (~0.25%). After yesterday's US equity recovery, most of the large Asia Pacific bourses rallied. South Korea and India were notable exceptions. Europe's Stoxx 600 managed to settle higher yesterday and is extending those gains today. If it settles higher, it will be the fourth consecutive gain. It has only fallen three times so far this month. US index futures are around 0.20%-0.45% lower. A poor 20-year auction weighed on long-term Japanese bonds, but the 10-year yield rose a little more than one basis point to approach 1.50%. Australia's benchmark 10-year yield tumbled a dozen basis points to around 4.40%. European yields are 1-2 bp lower, while the 10-year US Treasury yield is little changed near 4.45%. Gold is steady, holding above $3200 but below yesterday's high (~$3250). July WTI is little changed near $62. USD: The Dollar Index set the session low yesterday in early North American turnover a little above 100.00. It trended higher through the remainder of the session and reached 100.50. The gains were marginally extended in Asia Pacific turnover today before sellers reemerged and in early European activity slipped to through yesterday's low but still held above 100.00. The daily momentum indicators are getting stretched. Afterall, it bottomed a month ago. This week's US data are not key to the markets. US participants seemed to be less swayed by Moody's downgrade, the last of the three large rating agencies to downgrade the US than Asia and Europe. US Treasury Secretary Bessent also warned that some countries may face the same so-called reciprocal tariffs they did in early April. Yet he seems to try too hard to spin the administration's ad hocery into "strategic uncertainty." Beijing has warned that the new US attempt to dissuade the use of Huawei AI chips was a provocation that undermines recent trade talks and seemed to threaten unspecified retaliatory action. Meanwhile, at least half a dozen Fed officials speak today after five yesterday, including Atlanta Fed President Bostic. The derivatives market consolidates last week's move, which pushed the next Fed cut into Q4 from Q3. For the first time in three months, the Fed funds futures are beginning to question whether two cuts will be delivered this year, as the median Fed projection in March showed. Bostic, for one, suggested he is leaning toward one rate cut this year. EURO: The euro peaked yesterday near $1.1290 in early North American turnover. It trended lower and reached about $1.1225 in the NY afternoon, holding slightly above the pre-weekend high (~$1.1220). It frayed the four-week downtrend found near $1.1260 yesterday but settled below it. The euro held below $1.1280 today as it consolidates in the upper end of yesterday's range, and below the 20-day moving average, which is not settled above for two weeks. The eurozone's current account jumped by nearly 51 bln euros in March. brings the Q1 current account to about 131.76 bln euros from almost 109 bln euros in Q1 24. It is larger inconsequential today: Q1 GDP is history, and the focus is on the euro being among the most attractive alternatives to the dollar. Yesterday, the EC cut its eurozone growth forecast to 0.9% this year from 1.3% in November. It shaved next year's GDP projection to 1.4% from 1.6%. The risk is that both are optimistic. The median forecast in Bloomberg's survey is for 0.8% growth this year and 1.1% next. The IMF's recently minted forecasts put growth at 0.8% this year and 1.2% in 2026. CPI is seen falling to 2.1% this year from 2.4% last year and to 1.7% in 2026. The IMF's CPI projections are 2.1% and 1.9%, respectively. The ECB's staff will update its forecasts next month. CNY: The dollar reached a six-day high against the offshore yuan near CNH7.2265 today. It bottomed last week near CNH7.1790. The next notable chart area is CNH7.2350-80. The PBOC set the dollar's reference rate at CNH7.1931 (CNY7.1916 yesterday), the first increase in three sessions and only the fourth higher fix this month. Separately, reports suggest that has been an increased demand for yuan from Chinese exporters and investors. Onshore banks reported the first decline in foreign currency deposits in April from a three-year high in March. Chinese banks matched the PBOC's recent 10 bp cut in the key repo rate and cut the loan prime rates to 3.0% and 3.5% for the one-year and five-year tenors, respectively. After the disappointing April data, pressure is likely building for stronger efforts to support the domestic demand. JPY: The dollar has been sold to an eight-day low today slightly above JPY144.00. The 20-day moving average is near JPY144.50, and the dollar has not settled below it for two weeks. The JPY144.25 area corresponds with the (50%) retracement of the greenback's gains since the eight-month low on April 22, a little below JPY140. It is meeting resistance near JPY144.50 in the European morning. Poor reception at the 20-year JGB auction sparked a sharp sell-off in long-term Japanese Government Bonds today. The 30- and 40-year yields jumped a dozen basis points to new record highs. The BOJ is also trying to survey the market on how quickly it should reduce its purchases of government bonds. Japan reports April trade tomorrow. Consistent with the seasonal pattern, the surplus is expected to narrow from March. Japan's trade deficit averaged JPY532 bln a month in Q1 25 compared with an average shortfall of almost 620 bln a month in Q1 24. Despite the contraction in Q1 GDP, Prime Minister Ishiba rejected calls for tax cuts and pushed back against calls for additional government spending amid rising borrowing costs. Debt servicing costs about a quarter of the government's annual budget (compared with about 17% in the US). GBP: Sterling made a marginal new high for the month yesterday, by about 2/100 of a cent. It was greeted by sellers who drove it from a little above $1.3400 to about $1.3345 in the North American afternoon. It recorded an outside up day, trading on both sides of last Friday's range and settling above its high. It is trading in about a half-of-a-cent range below $1.3400 today. The Bank of England's Chief Economist Pill expressed concern that rates are being cut too fast and advocated a more "cautious" approached. He had dissented at the last meeting that cut rates. Households saw a jump in energy and water bills last month and this will see the April CPI jump by around 1%. The median forecast in Bloomberg's survey sees the year-over-year rate rise to 3.3% from 2.6% in March. The core rate may rise to 3.6% from 3.4%. The swaps market sees no meaningful chance of a cut at next month's central bank meeting, and the odds of an August cut are around 75%. The year-end rate is seen near 3.75%, from the current 4.25% target, the upper end of expectations since early April. CAD: The greenback eased to a three-day low, slightly below CAD1.3920. It recovered to around CAD1.3965 before stalling. This kept the consolidative tone intact. For the fifth consecutive session, it remained within the range set last Monday (~CAD1.3895-CAD1.4015). So far today, it is confined to a roughly CAD1.3930-CAD1.3970 range. Canada reports April CPI today. The median forecast in Bloomberg's survey is for a 0.2% month-over-month decline, which would be the first decline of the year. There were four months in 2024 that the CPI fell. Even with the 0.2% decline in April CPI, the annualized increase in the first four months of the year would be 3.9%. It fell in the last four months of 2024. The VAT holiday and its conclusion have been the main driver of the rebound. The underlying core measures are expected to be little changed, slightly below 3%. AUD: The Australian dollar was bid yesterday ahead of today's much-anticipated quarter-point rate cut by the central bank today. The Reserve Bank of Australia's cash target rate now sits at 3.85%. The central bank delivered a dovish cut, as Governor Bullock revealed that the debate was over a 25 bp or 50 bp cut. The central bank reduced its growth and inflation forecasts, and the new projections showed scope for 65 bp Q2 26. The market had discounted a year-end target rate of 3.34% yesterday and cut it to 3.16% today. This year's GDP forecast was reduced to 2.1% from 2.4% and the CPI projection was cut to 3.0% from 3.7%. The Aussie held slightly below yesterday's high (~$0.6465) and was sold to about $0.6410. Since the low was set, it has held below $0.6430 as it consolidates. MXN: The dollar remained below MXN19.50 yesterday and sellers pushed it to new seven-month lows late in the session near MXN19.30. Follow-through selling today has seen it dip below MXN19.26. The peso was the best performing currencies in Latam yesterday and so far, this month, it is only being bested by the Argentine peso (2.85% vs. 1.80%). The US dollar settled below its lower Bollinger Band (~MXN19.3560) for the second time in the past four sessions. Still, there is little chart support ahead of the MXN19.00-10 area. Mexico reports March retail sales tomorrow. A slight increase is expected. Wednesday's CPI report for the first half of May be more important. The headline CPI is expected to rise to 4% for the first time this year. The core rate may edge a little closer to 4%, which is the upper end of the target range (for both the headline and core rate: 3% +/- 1%). Banxico meets next on June 26 and the officials held out the possibility of a the fourth consecutive 50 bp rate cut. Disclaimer

Is the Moody’s U.S. Downgrade a Red Flag or Not? Why Falling Stocks and Rising Bond Yields Are a Red Flag for Markets Under different circumstances, Moody’s downgrade of U.S. sovereign debt might have been shrugged off. But this time, it triggered a sell-off in U.S. bonds, stocks, and the dollar as the new week opened. It’s a textbook case of the adage: “It’s not the news, it’s the market’s reaction to it that matters.” The market had been pricing in optimism—higher stocks, a firm dollar, and demand for bonds. The downgrade caught that mood off guard. Was Moody’s downgrade the trigger? Or did it merely highlight deeper vulnerabilities—such as ballooning U.S. fiscal deficits and rising uncertainty around tariffs and governance? A Brief History of U.S. Sovereign Debt Downgrades S&P Downgrade – August 5, 2011 • Downgraded U.S. debt from AAA to AA+ • Triggered by debt ceiling standoff and long-term fiscal risks • First-ever downgrade of U.S. sovereign debt • Market reaction: Stocks fell; U.S. Treasuries rose due to safe-haven demand Fitch Downgrade – August 1, 2023 • Downgraded from AAA to AA+ • Motivated by political dysfunction, rising deficits, and governance concerns • Increased market volatility • Fed and Treasury officials rejected Fitch’s reasoning Moody’s Downgrade – May 18, 2025 • Downgraded from Aaa to Aa1 • Cited rising deficits, political gridlock, and risk from extending the 2017 tax cuts • Aligns Moody’s with earlier downgrades by Fitch and S&P Why This Is a Bad Mix for Markets Rising bond yields, falling stocks, and a weakening dollar are a concerning trio. They signal a potential flight from U.S. assets. This echoes the market’s reaction after Trump’s “Liberation Day” tariff shock, which triggered a similar panic and raised alarms in the White House, leading to a 90-day pause in implementing reciprocal tariff rates. One difference here is the sell-off was not self-induced but a reaction to a third party action (i.e. downgrade). Bad mix: Bonds d0wn (yields up), stocks down, dollar down (EURUSD up) – CFD feed US 1 HOUR 10 YEAR = high yield) – May 19 US500 (SP500) 1 HOUR – May 19 EURUSD 1 HOUR – May 19 What Do Rising Bond Yields Mean? Bond yields tend to rise when: • Interest rate expectations increase, In this case, it is not clear what path the Fed will take given its forecasts of weaker employment and higher inflation due to the impact of tariffs. While there is little chance of a Fed rate hike, debate is how many rate cuts it will make given the uncertainty over the impact of tariffs, especially on inflation • Government borrowing continues to increase, expanding supply of bonds • Investors demand higher returns for holding riskier debt • Higher yields push up borrowing costs for consumers and corporations alike In this case, the Moody’s downgrade reminded markets of fiscal vulnerabilities, pushing yields higher. What Do Falling Stocks Signal? Stock declines usually suggest: • Concerns about future corporate earnings or economic outlook • Recession risk or uncertainty over the Fed’s policy direction • A shift in investor sentiment away from risk assets Why Is It a Dangerous Combination?: When both bonds and stocks fall :• Stagflation fears grow (slow growth + high inflation) • Monetary policy error risks increase: The risk of a policy error by the Fed is greater than normal depending on what side of its mandate (stable prices and maximum employment) it eventually responds to.. • No safe haven: Normally, bonds rise when stocks fall. If both drop and the dollar weakens too it reflects a loss of confidence across the board For Traders and Investors: What to Watch • For forex traders: If U.S. bonds and stocks fall together, it’s often a bearish signal for the dollar • For investors: Monitor the correlation. A parallel drop in bonds and equities is a market red flag Moody’s downgrade may not have told us anything new but the market’s reaction did. It exposed fragile confidence in the U.S. economy, driven by fiscal concerns, tariff policy uncertainty, and global headwinds. While the current move could be a one-off, the combination of rising yields and falling stocks is worth watching closely. It may not signal crisis yet, but it’s certainly flashing yellow. Take a FREE Trail of The Amazing Trader – Click HERE

Overview: Moody’s took away the US AAA rating before the weekend. It was the last of the big three rating agencies to do so. We do not think there is fresh information content in its belated decision, but participants in Asia and Europe have reacted by selling the US dollar and US assets. The 30-year bond yield is above 5% and the 10-year yield is near 4.50%. The S&P 500, which rose by over 5.25% last week, its second-best week of the year, is set to snap a five-day advance. It is poised to gap lower. The greenback is broadly lower. Nearly all the G10 currencies are at least 0.5% higher against the dollar but the New Zealand and Canadian dollars are trailing. Nearly all the emerging market currencies are firmer too, with the Philippine peso and Taiwanese dollar the notable exceptions. The MSCI Asia Pacific Index rose for the fifth consecutive week but began this week on a heavier tone. It fell for the third consecutive session. None of the large bourses escaped the pressure. Europe's Stoxx 600 also has a five-week advance in tow. It is off about 0.65% in late European morning turnover. The sharp rise in US Treasury yields triggered a global bond sell-off. The Antipodean 10-year rates rose 7-8 bp. The 10-year Japanese government bond yield rose nearly four basis points to 1.48%. European benchmark yields are 5-8 bp higher, with peripheral yields rising faster than the core. Gold is offering a haven today and is a little better than 1% higher near $3240. July WTI remains in last Thursday's range (~$60-$62.50). USD: The Dollar Index settled firmly last week, before Moody's downgrade. It had reached a three-day high and posted a bullish outside day. Moody's move came almost 14-years after S&P first took away the US AAA rating and nearly two years after Fitch's move. Although there seems to be little new news in the Moody's downgrade, the Dollar Index has been sold through last week's lows near 100.25 to about 100.15. Near-term risk may extend to 99.50. And still, late yesterday, with minor adjustments that sped up some Medicaid-related cuts, a House committee passed the White House-sponsored budget after some last-minute negotiations yesterday, which is going to pile on more debt. In what is a subdued week for US data, the Index of Leading Economic Indicators are due today. Most of the components of the index have already been released so it is little wonder that the markets do not often react to it. Still, the LEI has fallen for the past three months. In fact, it only rose in two months last year after falling every month in 2023 and all but one month in 2022. The Philadelphia Fed's non-manufacturing survey is due tomorrow. Like the business outlook survey released last week ( -4.0 vs. - 20.4 in April). it may improve from the -42.7 reading in April, the poorest since the pandemic. EURO: The euro settled at three-day lows but has returned bid. A down trendline off last month's high (~$1.1575) comes in near $1.1260 today. The euro has been bid through it in the European morning. A move above the $1.1285 area targets $1.1320 and possibly $1.1380. That said, intraday momentum indicators are overbought. There two data points of note this week are on Thursday when the German IFO survey and preliminary May PMI are released. The market remains confident of an ECB rate cut next month and has another cut discounted in H2, which, together, would bring the deposit rate to 2.75%. Some ECB officials have suggested that it is around the neutral rate. Meanwhile, reports indicate that the ECB is encouraging member banks to reduce their dollar funding needs; to de-risk from the possibility that in the next crisis, the US does not grant access to the swap lines (though it is a Fed not Treasury decision, and Chair Powell has indicated its commitment). One way to do this is reduce holdings of dollar-denominated assets. A possible offset may arise from reports that the US is preparing to retract capital rules adopted in the post-Great Financial Crisis period, and in particular the easing of the Supplementary Leverage Ratio. There is some talk in the press that the new plan, which Treasury Secretary Bessent has called a "high priority" that the measure may include granting Treasury bonds an exemption. Currently, large US banks are required to hold 5% of Tier One capital under the SLR. That is higher than in other high-income countries. CNY: The six-month low the dollar recorded last week (~CNH7.1790) may hold for a while. The greenback is trading with a slightly firmer bias against offshore yuan. It reached CNH7.2180. The 200-day moving average is near CNH7.2235. The PBOC set the dollar's reference rate at CNY7.1916 (CNY7.1938 Friday), the lowest since April 3. China has already released the most important high-frequency data of the week. Despite the myriad of reforms announced, the property market remains depressed (property sales -1.9% year-to-date, year-over-year), property investment weakened (-10.3% YTD YOY, vs -9.9%), and house prices (new and used) fell at a faster rate sequentially. April retail sales slowed (5.1% YOY vs. 5.9%), as did industrial production (6.1% YOY vs. 7.7%). Tomorrow, the banks will likely pass through the 10 bp cut in the key seven-day repo rate to the loan prime rates. Still, without more fiscal support the Chinese economy may struggle. After expanding 1.2% quarter-over-quarter in Q1, growth may slow below 1% this quarter, which would be the weakest since Q4 23. JPY: After it recorded new lows for the week ahead of the weekend, slightly below JPY145, the greenback caught a bid that lifted it back to new session highs in North American through JPY146.00. Today it has extended last week's pullback and approached JPY144.65. Initial support may be in the JPY144.25-45 area. With Q1 GDP reported before the weekend (-0.2% quarter-over-quarter), the March tertiary index (-0.3%) was not so important. Wednesday's April trade balance may be more notable. It may report a third consecutive monthly trade surplus for the first time since February-April 2021. Meanwhile, the US said it is close to a trade agreement with Japan, but we have not seen confirmation by Tokyo. That means it could be subject to the tariff regime President Trump said will be announced in the next 2-3 weeks. The first national election under Prime Minister Ishiba's term (started last September) will be held in July. Half of the seats of the 248-seats upper chamber of the Diet will be contested. Ishiba and his cabinet do not enjoy strong public support and a poor showing in the election will likely spur a stronger leadership challenge last in October. GBP: Before the weekend, sterling traded on both sides of Thursday's range, and today, it has trading on both sides of last Friday's range. It reached $1.3400 in the European morning. The near chart area of note is the three-year high set late last month near $1.3445. Meanwhile, the UK and EU struck a new tentative agreement on defense and security. Also, the UK agreed to extend fishing rights until 2038 in exchange for agreements on energy cooperation and agricultural standards. The UK's market-sensitive high frequency data is in the second half of the week. The highlights are the CPI, flash PMI, and retail sales. That said, there is little chance of back-to-back cuts by the Bank of England, which means no cut next month. The Monetary Policy Committee will have more data in hand when it meets in August. The odds of an August cut were pared to a little less than 75% from almost 85% a week ago. CAD: The CAD1.4000-20 area continues to frustrate US dollar bulls. That area capped the greenback several times last week. The US dollar is trading softer against the Canadian dollar today but so far has held the pre-weekend low near CAD1.3935. A break of it could target CAD1.3900. Tomorrow is the data highlight of the week for Canada: April CPI. Given the base effect, a 0.2% month-over-month decline the median forecast in Bloomberg's survey calls for will push the year-over-year rate to around 1.6% from 2.3% in March. The underlying core measures, which the central bank puts weight on, have crept up this year but were still below 3% in March (2.6% at the end of 2024). The swaps market has seen a small increase in the chances of a Bank of Canada rate cut at its June 19 meeting to around 67%, virtually unchanged over the past week. AUD: The Australian dollar traded in an almost 1.5-cent range last week and settled a little below the middle of it. The three-day low recorded ahead of the weekend (slightly below $0.6390) and the falling momentum indicators make for a heavier technical tone. Today's gains, on the back of the broadly weaker greenback have been limited so far to almost $0.6450 area. A move above there could see $0.6460. The first thing tomorrow, the Reserve Bank of Australia is widely expected to deliver the second cut in the easing cycle that began in February. The quarter-point cut will bring the cash target rate to 3.85%. During the market turmoil early last month, the futures market briefly toyed with the idea of a half-point move but calmer conditions have encouraged a less aggressive view. The market is pricing in two more cuts in H2 25. The swaps market is pricing a terminal rate of about 3.25%. MXN: After being sold to a seven-month low near MXN19.30 in the middle of last week, the greenback stormed back to MXN19.5660 ahead of the weekend. It stalled near the 20-day moving average (~MXN19.57), which has not closed above since April 11. Sellers appeared ready and drove the dollar down to around MXN19.47. The dollar slipped through the pre-weekend low to almost MXN19.4150 today. The peso resilience remains impressive given the aggressiveness it is cutting rates and the multifaceted challenge by the US. Of the 13 sessions this month coming into today, the peso has fallen in only three. There are two questions that will be tentatively answered with this week's high-frequency data, which begins in earnest in the middle of the week. First, is what kind of momentum did the Mexican economy enjoy at the end of Q1. The March retail sales on Wednesday and the IGAE economic activity (similar to a monthly GDP reading) the following day will be useful. The second question is about the price pressures, which seem to have picked up though not sufficiently to deter the central bank's third successive 50 bp rate cut last week. Indeed, Banxico's forward guidance put the market on notice that another half-point cut is likely as the central bank has grown more concerned about the growth outlook. The implied 12-month overnight rate in the swaps market fell to 6.55% at the end of last week from 7.28% at the end of the previous week. Disclaimer

The dollar traded choppily last week but settled higher against all the G10 currencies. It finished the week on a firm note. The messy upside correction for the dollar may continue. Despite disappointing retail sales and manufacturing output, and softer than expected CPI and PPI, the market has pushed the next Fed cut into Q4 from Q3. Most of the other G10 central banks will likely (again) cut before the Federal Reserve. Halfway through the quarter, the Atlanta Fed's GDPNow Tracker has Q2 growth at 2.4%, which if accurate, would probably be the best in the G10. Still the 90-day reduction of US (and Chinese) punitive tariffs has seen shipment orders surge, and imports, with knock-on effects on consumption, inventories (business investment) may again distort the underlying economic signals. Nearly 14 years after S&P took away the US AAA rating, and almost two years since Fitch did, Moody's matched the move after the markets closed Friday. There was a wobble in the thin post-equity close activity, but we suspect that Moody's move will be seen as a belated catch-up move without real implications of the US creditworthiness. Foreign investors have boosted their holdings of US debt since the S&P and Fitch's decision. Still, the greater US debt servicing costs and the budget the administration is seeking, which failed to pass a House committee last week underscores we nearly everyone recognizes, the US deficit and debt are on an unsustainable trajectory. The Reserve Bank of Australia is expected to cut is cash target rate for the second time this year early next week. The futures market discounts another two cuts this year. Chinese banks may shave the loan prime rates after the recent cut in the seven-day repo rates. While Canada is expected to see a fall in the headline year-over-year rate of inflation back below 2%, higher energy and water fees will drive UK inflation sharply higher. Mexico reports inflation for the first half of May, but the central bank's forward guidance last week signaled that the bar to another half-point cut is low. The preliminary PMI are among the surveys that will be released next week, and the Federal Reserve Chair Powell highlights the divergence between the real sector "hard" data, and the weaker "soft" survey data. US Drivers: The dollar sold off broadly from around mid-January through at least late April. US yields have risen for the past three weeks, and many economists have downgraded the chances of a recession following the US-China 90-day de-escalation agreement. Once again, the market diverged from the forward guidance of the Federal Reserve, but has re-converged, despite the softer the expected inflation readings and disappointing real sector data (April control/core measure of retail sales and a contraction in manufacturing output). Indications that authorities will likely announce a revision to the Supplemental Leverage Ratio appear to help support the US Treasury market and blunt the impact of the ECB's encouragement of member banks to reduce their dollar funding needs. Data: Federal Reserve Chair Powell continues to argue that the real sector data has not shown the weakness of the survey reports. The week ahead sees more survey data (several regional Fed surveys and the preliminary May PMI). These may pose headline risk, but the point is that real sector data are more important, and new and existing home sales, which will be released, are not mission critical. Prices: The Dollar Index rose for its fourth consecutive week. It retraced nearly (61.8%) of its decline from the late March high (~104.70) to the late April low (97.90). It posted a bullish outside up day ahead of the weekend by trading on both sides of Thursday's range and settling above its high. The momentum indicators are still rising but getting stretched. Still, it does not necessarily prevent a retest on the 102.00-102.10 area. The trendline off the lows is found near 100.15 at the start of the new week. EMU Drivers: The market has already discounted a strong chance (~90%) that the ECB cuts rates in June and maybe even another time before the next Fed cut is fully discounted. Many attribute the euro's relative resilience to portfolio re-allocation decisions. Recalling that the euro rallied more than 14% from early February through late April, the subsequent pullback has been thus far limited to about 4.3%. Data: Wage data and the preliminary May PMI are the highlights, though Germany's IFO survey may also draw some attention. This is not the data that will dissuade the market against its belief that the ECB will cut rates again next month. Prices: The reaction of the US-Sino 90-day cooling off period saw the dollar jump and the euro slump to $1.1065 at the start of last week. This nearly met the (61.8%) retracement of the leg up from the March 27 low (~$1.0735) found near $1.1025. Since the low last Monday was recorded, the euro has not been above $1.1265. It settled last week poorly. The single currency fell to a three-day low before the weekend near $1.1130. It looks vulnerable to more selling pressure and a return to the recent lows. China Drivers: Chinese officials continue to manage the exchange rate so that it is broadly stable against the dollar. The onshore yuan has risen by around than 1.3%% against the US dollar so far this year, making it among the weakest in the region, though the Indian Rupee is up less than 0.2%. That said officials appear to have introduced slightly more flexibility into the exchange rate by moving the dollar's daily reference rate by a little more than it had been. Data: After reporting April inflation last week, the high-frequency data cycle turns to the real sector--retail sales, industrial production, surveyed unemployment, as well as some indications on the property market and house prices. The year-to-date, year-over-year, way of reporting the data is expected to show some improvement in the pace but the recent rate cut and reduction in reserve requirements reflects the recognition that the economy needs more support if the 5% growth target is to be achieved. The property sector continues to bleed. Given the 10 bp in the seven-day repo rate the prime lending rate will likely be adjusted to match it. Prices: The offshore yuan set a six-month high against the dollar on May 13 (~CNH7.1790). It recovered to almost CNH7.2160 the following day and remained in the range for the past two sessions. The greenback closed firmly ahead of the weekend near CNH7.21. We suspect there may be scope for additional near-term USD gains, perhaps toward CNH7.2230-50, which houses the 200-day moving average and the (61.8%) retracement of the dollar's fall from the May 9 high (~CNH7. 2530). The rolling 60-day correlation of changes in the offshore yuan and the Dollar Index is near 0.25, its weakest since April 2022. The PBOC has reduced the dollar's reference rate in 11 of the past 14 sessions. The lower reference rate caps the dollar's upside (raising floor for the yuan). Japan Drivers: The exchange rate has continued to trade less influenced (correlation) with the US 10-year yield and this has corresponded to a period of elevated volatility. Three-month implied volatility has not been below 11%, where the 200-day moving average is found, for over a month. A year ago, it was near 9.5%. Arguably, it remains more about the broad dollar movement. Data: Japan's April trade balance may be of some interest as we get our heads around the impact of the tariffs. Given the strong seasonal patterns, it is likely the surplus narrowed from JPY559 bln in March. Exports rose by 2.3% in the first 20 days of April (year-over-year), which is slower than the 4% pace in March. Autos and steel were among the industries that saw weaker exports. The April CPI at the end of the week will likely show a more modest increase than the Tokyo CPI a few weeks ago, primarily because of the different weightings of the components in the respective indices. Several factors drove the Tokyo CPI jump, but the two that seem to account for most of the rise are a technical adjustment after last year’s tuition waiver and an unexpected jump in rent prices (biggest gain in 30 years). The BOJ already had the Tokyo CPI in hand when it met recently. Despite the contraction in Q1 GDP, the swap market finished last week discounting about 17.5 bp of tightening this year. While it was the least last week, it was also a little more than four basis points higher than the prior week. Prices: The dollar was slightly firmer against the yen last week. It was the fourth consecutive weekly gain. The greenback's high at the start of the week was near JPY148.65. It stopped short of the halfway mark of this year's range (~JPY149.40) and the 200-day moving average (~JPY149.70). It set new lows for the week ahead of the weekend, slipping briefly below JPY145.00, but recovered in the North American session to almost JPY146.10. Re-establishing a foothold above JPY146.35 would improve the near-term technical tone, though we note that the momentum indicators are getting stretched. UK Drivers: Sterling record a three-year high in late April near $1.3445. It has been moving broadly sideways, holding above $1.3200. The trade agreement with the US, which does not seem to be particularly impactful, although all the details have not been worked out. The Bank of England has cut rate rates twice this year and the bar to a cut in June seems high. Data: April CPI and retail sales, and the preliminary PMI are unlikely to impact the outlook for next month's meeting. Given the rise in household energy and water bills, inflation is likely to be strong. The median forecast in Bloomberg's survey is for a 1.1% month-over-month increase. Retail sales were robust in Q1, rising 1.6% in volume terms quarter-over-quarter, Wage growth is outstripping inflation, but consumer confidence dropped in April and the latest YouGov polls shows Prime Minister Starmer's support has fallen to its lowest level, mostly due to the erosion of support from his Labour Party. Excluding gasoline, retail sales may have slowed. Turning to the PMI, recall that in April, the composite fell to 48.5 (from 51.5). That matches the lowest since October 2022. The manufacturing PMI has been below the 50 boom/bust level since the start of Q4 24. The services PMI in April stood at 49.0, the least since January 2023. Bloomberg's survey found economists expect a sequential improvement in the PMI. Prices: Sterling was sold to about $1.3140 last Monday, meeting the (38.2%) retracement objective of the recovery from the April 7 low (~$1.2710) to the best level since February 2022 (~$1.3445). It reached $1.3360 in the middle of last week before being bogged down in consolidative activity in the last two sessions (~$1.3250-$1.3335). It settled last week near the lower end of the range. The downside correction does not appear complete. Nearby support is seen near $1.3225 and then last week's lows. The momentum indicators are still falling, and the five-day moving average remains below the 20-day moving average. Canada Drivers: The Canadian economy is vulnerable. The private sector lost nearly 75k jobs in the March-April period. Employment in the goods sector fell by 31k jobs in April, or 1.6%. Inflation is poised to ease. The risks of a cut next month by the Bank of Canada is increasing. Consistent with our hypothesis that rather than idiosyncratic factors, exchange rates are being broadly driven by the US dollar. The rolling 30-day correlation of changes in the exchange rate and the Dollar Index is at a new high for the year, a little above 0.70. Data: Two important high-frequency data points are due in the coming days. The first is the April CPI. A sharp drop is expected as the consumer carbon tax was eliminated, and oil prices fell. The Bank of Canada expects the year-over-year rate to fall to 1.5% (from 2.3% in March). The second report is March retail sales. They fell by 0.6% in January and another 0.4% in February. Preliminary data from StatsCan suggest retail sales recovered by around 0.7% in March, helped perhaps by consumers moving ahead of the tariffs. Vehicle sales jumped to the best March sales since 2018. Prices: The US dollar set a range Monday against the Canadian dollar (~CAD1.3895-CAD1.4015) that confined the price action for the rest of last week. It met sellers again ahead of the weekend as it approached CAD1.40. Still, the greenback managed to settle slightly higher on the week to record its first back-to-back weekly gain since the end of February. A move above CAD1.4020 targets the CAD1.4080 area. Australia Drivers: Over the past 30 and 60 sessions, changes in the Australian dollar and China's CSI 300 are about as correlated as is exchange rate and the S&P 500 (~0.60 and ~0.50 for 30- and 60-days, respectively). Still, it more correlated with the Canadian dollar (0.75 over the last 30 sessions and 0.72 over the last 60 session). The correlation with the Dollar Index is around 0.52 over the past 30 sessions and 0.55 over the past 60 sessions. Data: The Reserve Bank of Australia meets on May 20. It started the easing cycle in February with a quarter-point cut to 4.10%. The futures market has another quarter point fully discounted in the week ahead, and four cuts between now and the end of the year. The derivatives market sees the terminal rate near 3%. The flash May PMI is due the following day. The composite stood at 51.0 in April. It finished last year at 50.2 and was at 52.1 in May 2024. Prices: The Australian dollar initially was sold on last weekend's US-China agreement and tested this month's low slightly below $0.6360. It recovered to probe the $0.6500 area where it was turned back, like the previous week. The Aussie settled lower for the second consecutive week for the first time since the first half of January. A break of the $0.6355 area could spur the next leg down in the correction, which could target the $0.6285-$0.6300 area. Mexico Drivers: Given that the US push for re-shoring challenges the essence of Mexico's modernization, the peso has been unexpectedly resilient. It has allowed the central bank scope to cut interest rates by 150 bp so far this year despite inflation moderation stalling so to respond to the economic weakness. The peso remains, though, a risk-sensitive currency. The rolling correlation between the peso and the S&P 500 is near 0.70, the upper end of where it has been for the past two years. The US is threatening to tax worker remittances, which is often the largest source of hard currency revenue for Mexico, more than tourism and net exports. President Sheinbaum is trying to resist, but her options seem limited. The central bank delivered the widely expected 50 bp cut last week, and contrary to our expectations, signaled that it still saw scope for additional half-point cuts. Data: With the first estimate of Q1 GDP behind it (0.2% quarter-over-quarter) March retail sales are of little consequence. The revisions to Q1 GDP are also not very consequential. Instead, the focus is om the CPI for the first half of May. Both the headline and core rates are barely inside the 3% +/- 1% target range. At the end of the week Mexico reports April trade figures. Mexico's exports rose by 7.4% in Q1 25, the strongest quarterly showing since Q1 23. Some of the increase was likely influenced by the US tariffs. Seasonally, April tends to be a difficult month for Mexican exports. They have fallen in 14 of the past 20 years in April. Prices: The dollar was sold to a seven-month low against the peso in the middle of last week, slightly above MXN19.30. It recovered, as it did more broadly, and reached a three-day high ahead of the weekend, near MXN19.56. A move above the MXN19.57 area lifts the greenback's tone, but the more important hurdle was last week's high near MXN19.6650. The momentum indicators have turned up, and given the fundamental backdrop (weak US consumer sentiment and potential pullback demand, the US economic nationalism, the weak Mexican economy, risk of another 50 bp cut before the Fed cuts), we suspect the risk is more a move toward MXN19.90-MXN20.00. Disclaimer

Highlights include UK-EU Summit, China Activity Data, PBoC LPR, RBA, Global PMI Data, Inflation from Japan, Canada and the UK Newsquawk Week Ahead Highlights : 19th-23rd May 2025 MON: Canadian Holiday (Victoria Day), EU-UK Summit; Chinese Industrial Output (Apr), Retail Sales (Apr), House Prices (Apr), EZ HICP Final (Apr) TUE: PBoC LPR, RBA Policy Announcement, Norges Bank Financial Stability Report; EZ Current Account (Mar), Consumer Confidence Flash (May), Canadian CPI (Apr), German PPI (Apr), New Zealand Trade (Apr) WED: Japanese Trade Balance (Apr),UK CPI (Apr), US MBA (w/e 12th May) THU: ECB Minutes (Apr), CBRT Inflation Report; Australian Flash PMIs (May), Japanese Flash PMIs (May), UK PNSB (Apr), EZ, UK & US Flash PMIs (May), US Initial Jobless Claims (w/e 17th May), Canadian PPI (Apr) FRI: EZ Negotiated Wage Rates (Q1), Japanese CPI (Apr), German Detailed GDP (Q1), UK Retail Sales (Apr), US New Home Sales (Apr), Canadian Retail Sales (Mar) EU-UK SUMMIT (MON): Representatives are meeting in London for a Brexit reset summit. Ahead of the gathering, the European Council has outlined the blocʼs priorities as defence/security. As usual for such meetings, fishing and youth mobility will draw significant headline attention and often serve as a barometer for the tone of talks, as they are typically the issues with the greatest divergence of views. The EU is sending Commission President von der Leyen, Council President Costa and diplomat Kallas to the summit. From the UK, PM Starmer will be the main representative. Thus far, the main sticking points are reportedly on the mentioned points of fishing, according to Bloomberg. Overall, officials from both sides have been upbeat on signing a deal of some form to improve relations, but it remains to be seen how far this will go, what concession(s) either side may have to give and, perhaps most importantly, if it has any implications for UK-US and/or EU-US talks. CHINESE ACTIVITY DATA (MON): China will release April activity data on Monday, including Industrial Production, Retail Sales,Fixed Asset Investment, and the national Unemployment Rate. The release will be the first full data set to capture the economic impact of Aprilʼs tariff escalation, though sentiment has since improved following the temporary 90-day tariff truce announced last week, potentially tempering the importance of the series. In terms of prior readings, Industrial Production Y/Y printed at 7.7% in March, Industrial Production YTD at 6.5%, Retail Sales Y/Y at 5.9%, Retail Sales YTD at 3.61%, Fixed Asset Investment YTD at 4.2%, Unemployment Rate at 5.2%, and House Prices Y/Y at -4.5%. For April, both Industrial Output and Retail Sales are seen moderating to 5.5%. Desks expect the data to reflect tariff-related disruptions, particularly in export-linked manufacturing and private-sector investment. However, the recent easing in trade tensions may limit downside pressure in upcoming prints. While the rollback of US tariffs on China to 30% (from 145%) offers temporary relief, analysts suggest structural challenges in consumption and property remain unresolved. Any weakness in retail or employment figures may strengthen the case for further easing measures. PBOC LPR (TUE): PBoC will announce Chinaʼs Loan Prime Rates next week which are expected to be reduced by 10bps with the 1- year LPR (the rate most new loans are based on) currently at 3.10% and the 5-year LPR (reference for mortgages) currently at 3.60%. Expectations for reductions are not much of a surprise given that PBoC Governor Pan had announced sweeping measures to ease policy earlier this month including a 50bps RRR cut and 10bps cut to the policy interest rate with the 7-day Reverse Repo lowered by 10bps to 1.40% and the Standing Lending Facility reduced by 10bps for all tenors. Pan also announced they will lower re-lending rates, interest rates on structural policy tools, and the personal housing provision fund rate all by 25bps, as well as guide commercial banks to lower deposit rates. Pan also stated that China will use multiple policy tools to make dynamic adjustments and is to set up CNY 500bln in re-lending loans for elderly care and service consumption, while the total quota of two monetary policy tools to support capital markets was optimised to CNY 800bln and there were additional CNY 300bln of funds each for tech financing and Rural/SME lending. As such, the RRR cut was estimated to have released CNY 1tln in long-term liquidity, while Pan also stated that the 10bps cut in the policy interest rate is expected to drive down the Loan Prime Rates RBA ANNOUNCEMENT (TUE): The RBA is expected to cut rates at its policy meeting next week with money markets pricing in a 98% likelihood for the Cash Rate to be lowered by 25bps to 3.85% and just a 2% chance for rates to be maintained at the current level of 4.10%. As a reminder, the RBA decided to maintain the Cash Rate at the last meeting in April which was unanimously expected given that the central bank had just delivered a cut at the prior meeting in February and voiced cautiousness regarding future cuts. The language from the central bank provided very little clues regarding future policy adjustments as it noted that the outlook remains uncertain and underlying inflation is moderating, while sustainably returning inflation to target is the priority and the boardʼs assessment is that monetary policy remains restrictive. RBA also said that monetary policy is well-placed to respond to international developments if they were to have material implications for Australian activity and inflation. It also noted the continued decline in underlying inflation is welcome but there are risks on both sides with the board cautious about the outlook and it acknowledged inflation could move in either direction. Furthermore, the minutes from that meeting revealed the RBA thought it was not yet possible to determine the timing of the next move in rates nor was it appropriate at that stage for policy to react to potential risks. However, it stated that the May meeting would be an opportune time to reconsider with the decision not predetermined. Governor Bullock commented during the post-meeting press conference that the Board had not made up its mind on a May move, was not endorsing the market path on future rate cuts and did not open the door to a May rate cut. Nonetheless, the market is heavily anticipating a cut next week to support the economy and ease the burden on borrowers, with big 4 bank NAB even calling for a jumbo 50bps move, while recent data releases including contractions in household spending and building approvals, as well as Copyright © {{ copyright-year }} Newsquawk Voice Limited. All rights reserved. Registered Office One Love Lane, London, EC2V 7JN, United Kingdom · Registered Number 12020774 · Registered in England and Wales. newsquawk.com · +44 20 3582 2778 · info@newsquawk.com inflation residing in the RBAʼs 2-3% target, supports the case for the RBA to resume it rate reductions. CANADA CPI (TUE): The April release will be published on Tuesday. The previous data for March showed the rate of headline CPI easing to 2.3% Y/Y (prev. 2.6%), driven by lower gasoline and travel prices; core CPI eased to 2.2% Y/Y (prev. 2.7%). The Bank of Canada’s meeting minutes, released at the end of April, noted that the Governing Council agreed price pressures beyond April were hard to predict. Members favouring a rate cut highlighted the need for timely action, citing lags in policy transmission, anchored inflation expectations, muted near-term inflation risks, and economic weakness. Those favouring no change warned a further cut could be premature due to potential inflation pressure from tariffs. Money markets are currently pricing almost two 25bps rate reductions from the BoC by the end of the year, with the first fully discounted move seen by July. UK CPI (WED): Aprilʼs release is expected to see a marked jump. Upside is expected to be driven by price hikes at various utility providers, tax increases and then the usual setting of index prices in April; inflationary effects from the tariff situation are factoring into this. The BoE expects this dynamic to continue in the months ahead and inflation to hit 3.7% by September, partially driven by the aforementioned factors. Thereafter, the BoE looks for inflation to fall back to target; in the meantime, the May forecasts look for inflation to be at an average of 3.4% in Q2 and 3.5% in Q3. For April, Pantheon expects the headline figure to increase to 3.6% Y/Y (prev. 2.6%), surpassing the latest BoE forecast of 3.4%. On the BoEʼs peak forecast of 3.7% in September, Pantheon believes risks are skewed to the upside as upcoming cost pressures could spark follow-up price increases. Back to April, Pantheon expects Services to tick up to 5.1% Y/Y (prev. 4.7%). Metrics will be digested by an increasingly divergence MPC; however, we will receive both the May and June CPI series before the June 19th policy announcement, an announcement that is expected to see rates unchanged with the focus instead on August for the next potential cut, as it stands markets ascribe around a 55% chance of a 25bps cut. ECB MINUTES (THU): Aprilʼs meeting saw a 25bps cut as expected and the old language around restrictiveness was removed. This took the ECB to the top end of its 1.75-2.25% neutral rate estimate. Accompanying forward guidance was unsurprisingly noncommittal, though the statement did highlight increased uncertainty and an associated confidence impact that is “likely to have a tightening impact on financing conditions”; on this, participants were attentive to any hints around an offsetting policy response (i.e. dovish action). Just after the meeting, sources reported the decision to cut was unanimous. Lagarde didnʼt add too much, aside from stressing no argument was made for 50bps or other stimulus, though she made the point that they are viewing tariffs as a demand shock. From the Minutes, we are attentive to whether 50bps was discussed at all (Lagarde said there was no argument for it), whether there were any relatively firm views on a June cut expressed as sources have suggested, and if any opposition to the decision to remove language around restrictive was expressed. As usual, the Minutes will be regarded as stale and likely even more so than normal given recent significant tariff developments. Try Newsquawk free for 7 days EZ FLASH PMI (THU): The Eurozone releases its Flash PMIs for May on Thursday, Manufacturing expected at 49.5 (prev. 49.0), Services at 50.3 (prev. 50.1) and Composite at 50.8 (prev. 50.4). The prior readings saw Manufacturing at 49.0, Services at 50.1, and the Composite at 50.4. While Aprilʼs data showed only mild improvement, recent survey indicators such as Sentix and ZEW have rebounded, suggesting the initial wave of pessimism following the US “Liberation Day” tariffs may have moderated. Oxford Economics notes the strong Q1 German industrial output was driven by front-loaded US demand in autos and pharma, raising the risk of a Q2 correction as that temporary boost unwinds. The temporary 90-day tariff truce between the US and China has also eased market anxiety around global trade spillovers, though uncertainty around US-EU trade relations remains elevated, with US Treasury Secretary Bessent recently suggesting progress was slow. From a policy perspective, the ECB is widely expected to cut rates in June, a weak PMI print would likely reinforce that view. UK FLASH PMI (THU): The UK will release Flash PMIs for May on Thursday, Manufacturing is seen at 45.9 (prev. 45.4) and Services at 49.5 (prev. 49.0). UK PMIs saw a sharp deterioration in April, with the Composite PMI at 48.2 (exp. 50.4, prev. 51.5), marking the first contraction in private sector output since October 2023. The Services PMI came in at 48.9 (exp. 51.5, prev. 52.5), while Manufacturing dipped to 44.0 (exp. 44.0, prev. 44.9), its lowest level in nearly three years. S&P Global cited falling domestic and external demand, with new orders declining for a fifth consecutive month and export business contracting at the fastest rate since May 2020. With the US-China 90-day tariff truce now in place, desks expect some relief on trade sentiment, but domestic cost pressures and demand fragility persist. A sub-50 composite print in May would reinforce the narrative of a stalling UK recovery and potentially support some expectations for a summer/late-summer BoE rate cut. JAPANESE CPI (FRI): Japan will release national CPI data for April on Friday, the core Y/Y is expected to tick up to 3.4% (prev. 3.2%). The prior national figures showed Core CPI Y/Y at 3.2%, headline CPI Y/Y at 3.6%, and M/M CPI at 0.3%. Desks expect the April data to reflect residual effects from the reduction in energy subsidies and fresh fiscal year price hikes, particularly in food and education. Tokyo CPI — considered a leading indicator — accelerated to 3.4% Y/Y (vs. exp. 3.2%, prev. 2.4%), while the “corecore” index (ex-fresh food and fuel) jumped to 3.1% (prev. 2.2%), raising pressure on the BoJ. While policymakers kept rates steady at the May 1st meeting, recent commentary suggests a readiness to hike further if inflation remains sticky. However, global risks, especially from US tariffs and softening external demand, may limit the BoJʼs near-term scope. It was reported that Japanʼs top trade negotiator Akazawa could travel to Washington next week for a third round of trade talks, according to Reuters source UK RETAIL SALES (FRI): The first hard data read on the sector under Trumpʼs tariffs, an April series which follows a strong Q1. For April, Investec expects further growth in sales volumes but at a more moderate pace than seen last time, forecasting 0.3% (prev. 0.4%) M/M; attributing much of this expected upside to good weather and the increase in the National Living Wage. In terms of other leads, the Barclaycard consumer spending report for the period saw the largest uplift in card spending since June 2023, driven by favourable weather and the Easter period. Elsewhere, NIQ/GfK Consumer Confidence fell in the month amid an increase in multiple utilities and concerns around renewed high inflation. Overall, the Retail series is expected to remain robust but with a slightly slower pace of sales volume growth as the favourable influence of good weather is offset by utility increases and price concerns. Copyright © 2025 Newsquawk Voice Limited. All rights reserved. Registered Office One Love Lane, London, EC2V 7JN, United Kingdom · Registered Number 12020774 · Registered in England and Wales. Copyright © {{ copyright-year }} Newsquawk Voice Limited. All rights reserved. Registered Office One Love Lane, London, EC2V 7JN, United Kingdom · Registered Number 12020774 · Registered in England and Wales. newsquawk.com · +44 20 3582 2778 · info@newsquawk.com newsquawk.com · +44 20 3582 2778 · info@newsquawk.com Join GTA for FREE – Click HERE

Overview: While the US dollar is a little softer today against the G10 currencies, it remains mostly within Wednesday's range. The yen is a notable exception. It made a new high for the week despite the contraction in Q1 25 GDP. Most emerging market currencies are firmer. The markets have not reacted to a statement from President Trump that his administration lacks the capacity to negotiate with all the parties so in the next 2-3 weeks, the US will simply set the tariff rates. Asia Pacific equities ended the week on a mixed note. Europe's Stoxx 600 is up about 0.6%, the fourth daily advance this week. US index futures are up about 0.25%. European bonds are rallying. The 10-year benchmark yields are off 4-5 bp today. The US 10-year Treasury yield is down almost four basis points to slip below 4.40%. Note that the ECB's pressure on its member banks to reduce dollar funding needs could lead to sales of USD assets, but the impact has been offset by signals that the US will lower the Supplemental Leverage Ratio, which will incentivize banks to hold more Treasuries. Gold staged an impressive recovery yesterday, rallying from $3120 to $3240. Follow-through buying lifted it to around $3252 today where sellers drove it back through $3200. It is hovering near there in late European morning turnover. July WTI is consolidating within yesterday's broad range and is trading mostly between $60.80 and $61.80 today. USD: The Dollar Index is in a narrow range (~100.50-80) and remains inside Wednesday's range (~100.25-101.15) for the second consecutive session. Today's data do not have much market-moving ability. This includes housing starts and permits, NY Fed services survey, and the March portfolio capital report (TIC). After an 11.2% plunge in March housing starts, a modest recovery is expected. Perhaps, the market may be most sensitive to the preliminary May University of Michigan consumer confidence survey and inflation expectations. Consumer expectations may have improved a little. The one-year inflation expectation stood at a lofty, even though it seemed exaggerated at 6.5% in March. The 5–10-year inflation outlook was at 4.4%. In comparison, the two-year breakeven (difference between the inflation protected security and the conventional note) is about 2.65%, while the 5-10 year breakevens are around 2.35%-2.40%. Meanwhile, the month-over-month increase in the April CPI was a smidgeon less than expected and the PPI actually fell. In nine of the 10 sessions through Wednesday, the market downgraded the chances of a September cut. However, odds increased after yesterday's soft retail sales (decline in the control measure, which excludes autos, gasoline, building materials and food services) and contraction in manufacturing output. A week ago, the Fed funds futures market had priced in about 66 bp of cuts this year and now a little less than 57 bp. Once again, the market deviated from the Fed's guidance and has converged again with it, rather than the other way around. Turning to the TIC data, many column inches have been recorded this year discussing capital flight from the US. Yet, note that in the Jan-Feb period, the TIC data showed a net inflow of about $338 bln compared with a net outflow of around $59 bln. In March 2024, the US recorded a net inflow of almost $98 bln. The concern became acute in April, for which the TIC data will not be available until mid-June. EURO: The euro has been confined to about a two-cent range this week between around $1.1065 and $1.1265. It is trading today in about a 20-tick range on either side of $1.12, where options for nearly 4 bln euros expire today. The eurozone reported a March trade surplus of 36.8 bln euros, widening from the February 24 bln euro surplus. This puts the Q1 surplus at about 61.6 bln euros. The surplus in Q1 24 was around 58.2 bln euros. Some observers see a seasonal pattern favoring a wider surplus in March, but in the last 20 years, the surplus widening on 13 March's. That said, the surplus has widened in eight of the past 10 March's. CNY: The dollar's recovery from the low for the year set Tuesday near CNH7.1790 has been stymied near CNH7.2160. The greenback is has remained within Wednesday's range (~CNH7.19-CNH7.2160). The PBOC set the dollar's reference rate at CNY7.1938. (CNY7.1963 yesterday and CNY7.2095 a week ago). It was set lower for the fourth time this week. Many observers, including ourselves, think that China came out ahead in last week's trade talks. The US dropped (for 90 days) the reciprocal tariffs announced in early April, as Beijing required to hold the talks. Still, the sectoral tariffs, the de minimis tariffs (54% instead of 120% and $100 fee), and the planned port charges remain in effect. Taking advantage of the 90-cooling off period has seen a surge in container bookings from China to the US, pushing up shipping costs. Walmart indicated that despite the lower tariffs, it plans on raising prices shortly. Meanwhile, the US has stepped up its efforts to block other countries from taking Huawei chips. India appears to have been emboldened by China and is threatening to retaliate for what it says are really "safeguard" tariffs and not really national security protections in the steel and aluminum tariffs. Meanwhile, the US administration says a trade deal with India may be near. Brazil and China signed over around 30 sectoral and investment agreements with China this week and Colombia has reportedly signed a memorandum of understanding (MOU) with China's on the Belt Road Initiative. In the region, Venezuela, Ecuador, Chile, Peru, Bolivia, and Panama have formally joined the BRI. JPY: After rallying to JPY148.65 on Monday, its highest level since April 3, the dollar has unwound the gains and set a new low for the week today slightly below JPY145.00. There are options for $735 mln that expire today. The four-day decline has seen the greenback retrace (38.2%) of its gains since the eight-month low was recorded on April 22, near JPY139.90. The (50%) retracement is near JPY144.25. Counter-intuitively, the yen's gains came despite a disappointing Q1 GDP. Japan reported a 0.2% contraction in Q1 GDP after a 0.6% expansion in Q4 24. Consumption was flat after Q4 consumption was revised from zero to 0.1%. Business spending jumped 1.4% after a 0.8% increase in Q4 (initially a 0.6% increase). Inventories contributed 0.3% after dragging GDP lower by 0.3% in Q4. Net exports cut growth by 0.8% after adding 0.7% in Q4 24. On a more positive note, March industrial production was revised to 0.2% from an initial estimate of a 1.1% decline. The swaps market has about 16 bp of tightening discounted for this year, down a few basis points from this week's high. GBP: Sterling continues to consolidate inside Wednesday's range (~$1.3255-$1.3360). The down trendline drawn off the recent highs comes in near $1.3360 today. A move above there would re-set the sights on $1.3400-45 area. On the other hand, a break of the $1.3225-50 area could signal a return to the $1.3140 area. Although yesterday's first reading of Q1 GDP was better than expected (0.7%) and the strongest since Q1 24 (0.9%), which itself was the best since the end of 2021, the momentum may have stalled as the quarter wound down. Attention next week turns to Q2 data, with April CPI, retail sales, and the preliminary May PMI. The swaps market sees little chance of back-to-back rate cuts, which nearly rules out a cut next month. The market shaved the odds of a cut in August to about 72% from nearly 97% at the end of last week. CAD: For the third time this week, the greenback was greeted by sellers when it poked above CAD1.40. Chart resistance is seen in the CAD1.4015-20 area. It settled near CAD1.3960 yesterday and was sold to about CAD1.3935 before finding new bids. Still, the momentum indicators are still moving higher, and this suggests that despite the frustration, there is scope for another try higher. However, a break of the CAD1.3890-CAD1.3900 area would weaken the technical outlook. Canada also reports its March portfolio flows today. In the first two months of the year, Canada reported a net inflow of C$1.5 bln. In the Jan-Feb 2024 period, Canada recorded net inflows of C$9.2 bln. In March 2024, Canada saw C$14.7 bln capital inflows. AUD: After being turned back from a slight push above $0.6500 on Wednesday, the Australian dollar fell a little below nearly $0.6390 yesterday. That has held today, and the Aussie has recovered to about $0.6435. The momentum indicators have only recently turned lower, suggesting scope for further Aussie losses. We suspect that the downside correction can continue and target the $0.6300 area. There is little doubt in the market mind that the Reserve Bank of Australia will cut its cash target rate next week by 25 bp to 3.85%. Moreover, the market is confident of another cut in Q3 and Q4. MXN: As widely expected, Mexico's central bank cut is overnight target rate by another 50 bp to 8.50%. It is the third cut this year and the seventh consecutive cut. The central bank is not done and suggested that "more adjustments of a similar magnitude" was possible. This is a bit more dovish than we and the market expected. The US dollar made new highs for the session on the announcement to nearly MXN19.52 but has come back offered today, returning to the MXN19.4500 area in the European morning. The swaps market has almost another 125 bp of Banxico cuts discounted over the next 12 months. The peso has appreciated by about 7% this year, of which a little more than 5% took place this quarter. Disclaimer

Overview: There has been little follow-through dollar buying today after its recovery in North America yesterday. The greenback is softer against most of the G10 currencies. The Antipodeans are lagging alongside the Norwegian krone, perhaps weighed down by the sharp drop in oil prices following President Trump's indication and a deal with Iran may be near. Switzerland reported stronger-than-expected Q1 GDP, and the franc is the strongest of the G10 currencies followed by the Japanese yen. Most emerging market currencies are firmer. The handful of exceptions in China, India, Thailand, and Russia. Equities are struggling today. Most of the large bourses in the Asia Pacific region fell. India, Australia, New Zealand, and Singapore managed to eke out gains. Of note, Japan's Topix, which snapped a 13-day advance yesterday, saw more profit-taking today. Europe's Stoxx 600 is off for the second consecutive session. Yesterday's loss ended a four-day advance. The S&P 500 and Nasdaq futures are a little more than 0.5% lower. European 10-year yields are mostly a couple basis points lower, while the 10-year Treasury yield is three basis points lower near 4.50%. Gold extended yesterday's losses and fell to almost $3120, its lowest level since April 10. It has recovered to almost $3177. It must retake $3200 to stabilize the tone. The prospect of a deal with Iran sent June WTI to a new low for the week near $60.50. The next area of chart support may be around $59.60. USD: The Dollar Index reached almost 100.25 yesterday in Europe, a three-day low, but was bid in North America to new session highs, and recovered to nearly 101.15, leaving a potential bullish hammer candlestick pattern in its wake. DXY held trendline support off the late April and early May lows found near 99.90 today, which is also about where the (50%) retracement of the gains since the April 21 low is found. However, there has been no follow-through buying today. DXY was capped near 101.00 and retreated to around 100.60. There is a slew of US data today, and something for everyone. There are two Fed surveys (NY and Philadelphia). There are two real sector reports (retail sales and industrial production), price data (PPI), and March business inventories. Note that the Chicago Fed's model on real-time spending warns that retail sales, excluding autos may fall by 0.6%. The median in Bloomberg's survey calls for a 0.3% gain. The Atlanta Fed GDP Now sees the economy tracking 2.3% growth here in Q2 and will update its findings after today's reports. The postponement of the harshest US and China tariffs have prompted economists downgrade the risks of a US recession and upgrade forecasts for Chinese growth this year. Fed Chair Powell discusses the policy framework review. There is no Q&A, and the Fed chair will likely stay away from topics he avoided at the post-FOMC press conference, like is relationship with the president. EURO: The euro reached a three-day high near $1.1265 in the European session yesterday, and during the North American session, it was sold back to $1.1165. The high met the (61.8%) retracement objective of the leg down from last week's high (~$1.1380) and the (38.2%) retracement of the larger move since the year's high was set on April 21 (~$1.1575). The euro held yesterday's low today and recovered to around $1.1230. The eurozone revised Q1 GDP to 0.3% from 0.4%. Separately, it reported that the second consecutive rise in the aggregate industrial production was greater than 1%, for the first time since August-September 2022. It soared 2.6%, well above the median forecast for a 2% increase. CNY: The dollar rose for the first time yesterday in four sessions against the offshore yuan. It recovered from a six-month low on Tuesday (~CNH7.1790) to about CNH7.2160 yesterday. It is consolidating quietly today in the upper end of yesterday's range and has traded between about CNH7.2030 and CNH7.2155. The next technical target is in the CNH7.2230-50 area. The yuan has gained about 0.85% against the dollar here in May, making it the third best performing currency in the region after the Taiwanese dollar (~5.7%) and the South Korean won (~1.5%). The PBOC set the dollar's reference rate at higher for the first time this week (CNY7.1963 vs. CNY7.1956). It is the third higher fix in the past 13 sessions. JPY: The dollar traded in a nearly two-yen range yesterday and settled a little above the middle of it near JPY146.80. It briefly traded through Monday's low (~JPY145.70) late in the European morning and traded above JPY147 early in the NY afternoon. It settled near JPY146.75 yesterday and has not traded above it today. Instead, it was pushed back to JPY145.50. A move above JPY146.30 would help steady the tone. Japan will provide is first estimate of Q1 GDP on Friday. A small contraction is expected. There may have been three drags: public consumption, private investment, and net exports. Consumption and inventories may have been offsets. Meanwhile, Nissan announced it will close seven factories (out of 17 globally) and lay off 20k employees, which is 11k more than it previously announced following the poor earnings released on Tuesday. GBP: Sterling saw a five-day high near $1.3360 a little before the North American session began yesterday, but trended lower subsequently and fell to about $1.3255, to record a new session low in the North American afternoon. It is trading in a $1.3260-$1.3305 so far today. Q1 GDP was reported. It expanded by 0.7%, a little better than the market and the Bank of England expected. Consumption improved sequentially (0.2% vs 0.1%), though not as much as anticipated. Total business investment showed unexpected strength (5.9% vs. -1.9% in Q4). Government spending surprisingly fell by 0.5%. Economists had expected another 0.5% increase, the same as in Q4 24. March GDP rose by 0.2%, but industrial output fell by 0.7%, with manufacturing off 0.8%. Services output rose 0.4% and construction improved by 0.5%. The trade deficit narrowed with and without the precious metals trade. CAD: On yesterday's pullback, the US dollar held above Monday's low slightly below CAD1.3900. It recovered to CAD1.3985. It is trading firmly in the upper end of yesterday's range. It has been confined to a narrow CAD1.3960-90 range so far today. The greenback needs to surmount the CAD1.4015-20 area that capped it on Monday and Tuesday to lift the technical tone. Canada's high-frequency data today includes manufacturing and wholesale sales and existing home sales. They are not typically drivers of the Canadian dollar or Canadian interest rates. Tomorrow's March portfolio flow report may be of some interest. In the first two months of the year, Canada reported net inflows of about C$1.45 bln. This compares with $9.2 bln in the first two months of 2024 and $11.1 bln in Jan-Feb 2023. AUD: The Australian dollar briefly poked above $0.6500 yesterday holding below last week's six-month high near $0.6515. It was turned back and fell to almost $0.6420 in the North American afternoon. It has failed to get much traction and has been sold slightly through yesterday's lows to $0.6415 despite the stronger employment data. A break of the $0.6400-10 area will re-target this week's low in the $0.6355-60 area. The 89k increase in jobs was more than three-times what was expected and follows a 36.4k increase in March. Of those jobs, 59.5k were full-time positions (12.2k in March). For the fifth consecutive month, the unemployment rate is holding between 4.1% and 4.2%. This is particularly impressive given the rise in the participation rate to 67.1% from 66.8%, a three-month high. Still, the market is confident of that the Reserve Bank of Australia will cut rates next week and deliver two more cuts before the end of the year. MXN: The combination of the resilience of the Mexican peso, which set new highs for the year yesterday, weak economic impulses, and inflation within target range, even if barely, allows Banxico to deliver its third consecutive half-point cut later today. The dollar fell to nearly MXN19.30 yesterday in North American turnover before recovering to around MXN19.39. It has been confined to a narrow range of about MXN19.36-MXN19.40. It has hardly been able to re-enter the lower Bollinger Band (~MXN19.3725). A 50 bp cut today would bring the overnight target rate to 8.50%. We suspect that the central bank may signal a more moderate pace of easing, while keeping policy restrictive. The swaps market is pricing in a year-end rate between 7.25% and 7.50%. Disclaimer

Are Tariffs a de facto tax hike that raises prices for consumers? Are Tariffs 1 Bad Hidden Tax Hike on Consumers? Since President Trump brought tariffs back into the spotlight, a heated debate has emerged: Are these import taxes truly about protecting American jobs, correcting trade imbalances, or are they simply a way to raise government revenue? While the political messaging varies, the economic impact remains clear. tariffs function as a hidden tax hike on consumers. What Are Tariffs and How Do Tariffs Work? A tariff is a government-imposed tax on imported goods, typically calculated as a percentage of the item’s value. While the tax is officially paid by the importer, that cost doesn’t stop there. It’s passed along the supply chain, from wholesalers to retailers and ultimately hits the consumer in the form of higher prices. Do Tariffs Raise Prices? When a tariff is levied, importers face increased costs. These costs are rarely absorbed entirely. Instead, businesses pass them on, resulting in more expensive products at the checkout line. Here’s a simple breakdown of the process: 1. Tariffs are applied to imported goods. 2. Importers pay the tariff to the government. 3. The cost is passed along to wholesalers, manufacturers, or retailers. 4. Retailers increase prices to maintain profit margins. 5. Consumers pay more in the form of higher prices 6. Government revenue rises but at the expense of household budgets. This process mimics the effects of a traditional tax increase, especially for goods with few domestic alternatives. Are Trump Tariffs Hidden Taxes on Consumers? Absolutely. While not labeled as such, tariffs are a regressive form of taxation. Like sales taxes, they disproportionately affect lower-income households that spend a greater share of income on goods. Unlike sales taxes, tariffs are buried in the supply chain, making them harder for the public to trace. Tariffs shift wealth from the private sector (consumers and businesses) to the public sector (government revenue) without directly announcing it as a tax hike. Trump Trade and Tariff Policy:- Good or Bad? Tariffs vs. Taxes Traditional taxes, like income or sales taxes, are openly legislated and visible to the public. In contrast, tariffs are often disguised as trade policy, making them politically easier to implement but economically equivalent to tax increases. For example, President Trump’s tariffs on goods from China and other countries have raised billions in revenue (e.g. estimated $16 bln in April). This is,money that ultimately came from American shoppers, not paid by foreign companies. The only way this would be mitigated would be if US retailers or foreign suppliers reduced their profit margins to limit some of the price increases. The Irony of Modern Tax Policy Current U.S. tax policy discussions is centered on making the the 2017 tax cuts permanent. Ironically, while officials frame this as “cutting taxes,” making those cuts permanent before they expire at year end only prevents a future tax hike. In other words, what is described as a tax cut bill is only maintaining the status quo. Meanwhile, tariffs act as a tax without the same level of scrutiny despite raising costs for nearly every consumer. No matter how the government tries to spin it, an increase in tariffs is a de facto or hidden tax hike on the average consumer. The main difference between tariffs and other types of taxation is latter is out in the open while the former de facto tax is hidden. For example, an increase in income and/or sales taxes is visible to the public. When income taxes or sales taxes are raised it is transparent to the public. On the other hand, the cost of tariffs to the public are often buried in trade policy announcements. In any case, both result: in a tax on consumers and more revenue flowing to the government. Tariffs Are Taxes in Disguise No matter how they are packaged, tariffs act as indirect taxes. They generate government revenue, increase consumer prices, and reduce purchasing power. Understanding this helps put the current Trump tariffs and trade policy in perspective, which is a tax hike in disguise. In an era of global trade and complex supply chains, consumers deserve transparency. Whether through tariffs or traditional taxes, the end result is the same, more money out of your pocket and into government coffers. Take FREE Trial of The Amazing Trader – Click HERE

Overview: The US dollar is extending yesterday's pullback after Monday's sharp rally. Monday's rally had met or approached several technical targets, but the momentum and news stream, including the downgrading of US recession forecasts, the pushing out of the next Fed rate cut into Q4 seemed to favor further dollar gains. Against many pairs, the greenback has given back all of Monday's gains or nearly so. The dollar is weaker against nearly all the world's currencies. The South Korean won has strengthened the most following talk that the currency was discussed in bilateral trade talks with the US. It is up nearly 1.8%, followed by the Japanese yen, which is up almost 1.2%. Equity markets are mixed today. In Asia Pacific, Hong Kong's Hang Seng was up 2.3% and the index of mainland shares that trade there was up 2.5%. China's CSI 300 itself was up 1.2%. Taiwan's Taiex soared 2.1%, while South Korea's Kospi rose 1%. Most of the bourses in the region rose. However, the Stoxx 600 in Europe is threatening to snap a four-day advance and US index futures are trading with a heavier bias. European benchmark 10-year rates are mostly 1-2 bp lower, though UK Gilts are flat. The 10-year US Treasury yield is off a couple of basis points to 4.45%. It traded to 4.50% for the first time yesterday since the peak near 4.60% about a month ago. Despite the continued pressure on the dollar, gold is trading quietly inside yesterday's (~$3216-$3265) range. Monday's low was about $3207. After reaching a 2.5-week high yesterday a little below $64, June WTI is trading heavier today below $63. USD: The Dollar Index continues to unwind Monday's gain scored in reaction to the US-Chinese 90-day de-escalation. After peaking near 102.00 on Monday, it frayed 101.00 in late turnover yesterday. Follow-through selling today has seen 100.30. The immediate risk now extends toward 100.00. The losses come even as the market pushes out the next Fed cut into Q4 from Q3. For the first time in three months, the Fed funds futures are no longer fully discounting a cut by the end of Q3. Moreover, after the agreement with China, many economists reduced the odds of a recession. Meanwhile, the "big beautiful" budget bill is progressing through the House of Representatives. Making permanent the 2017 tax cuts and extending them will and getting rid of the tax on overtime pay and tips will cost an estimated $4 trillion over the next decade, while the spending cuts are worth about $1.5 trillion. The House could send the bill to the Senate next week, and the narrower Republican majority warns of some compromises. EURO: The euro recovered from Monday's low (~$1.1065) to approach $1.1200 yesterday. Follow-through buying today lifted it a little through $1. 1260, the (38.2%) retracement of the euro's losses since the April 21 high. The next push above there targets the $1.1300-20 area. Meanwhile, the strong German (3.0%) and Spanish (0.9%) figures for March industrial production point to a firm aggregate report tomorrow. The highlight remaining this week is the EC's updated economic forecasts due at the end of the week. The EC's previous forecast saw the eurozone economy growing by 1.3% this year, while the ECB has it at 0.9%. The EC had inflation this year at 2.1% while the ECB's forecast was at 2.3%. CNY: The dollar recovered from a six-month low near CNH7.1790 yesterday and managed to settle (slightly) below CNH7.20 for the first time since last November. It reached CNH7.2160 earlier today but is straddling CNH7.20 now. Yesterday, the PBOC set the dollar's reference rate below CNY7.20 for the first time since April 7. Since the greenback is allowed to trade in a 2% band around the fix, the lower reference rate ostensibly caps the greenback's upside. It set the dollar's reference rate lower for the third consecutive session. today. It was set at CNH7.1956 today (CNY7.1991 yesterday). That the offshore yuan is trading stronger than the onshore yuan lends credence to ideas that the speculative selling pressure on the yuan has subsided. In light of the 90-day de-escalation of Sino-American trade tensions, many economists have downgraded the chances of a US recession and upgrade China's growth prospects. Note that the US tariff on de minimis products from China was reduced from 120% to 54%, plus there is a flat fee of $100 per shipment, which still seems prohibitive, goes into effect today. Lastly, China's lending figures were released. Year-to-day, aggregate lending is running almost quarter faster than last year (CNY16.34 trillion vs CNY12.74 trillion. JPY: After reaching JPY148.65 in response to the US-China agreement on Monday, the US dollar pullback to JPY147.45 yesterday and to JPY145.60 today. Monday's low was near JPY145.70. A break of JPY145.30 could signal a move toward JPY144.30. Japan's producer prices rose 0.2% in April for a 4.0% year-over-year pace. This is the slowest of the year but matches last year's high. Meanwhile, trade talks with the US seem to be going poorly. The weakness of the Japanese economy, the uncertainty about the US tariffs keeps the BOJ on the sideline, but hawkish comments by the BOJ's Uchida may have encouraged the market to boost the chances of a hike before the end of the year. The 18 bp of tightening now discounted in the swaps market for year-end. Still the perceived delay in the move may have been a driver of the 10-year yield, which jumped from 1.25% last Monday to nearly 1.50% yesterday before profit-taking kicked in. It is near 1.46% now. The high set in late March was near 1.60%. GBP: The (38.2%) retracement of sterling's rally from the April 7 low (~$1.2710) came in near $1.3165 and was met on Monday. Sterling recovered from Monday's low near $1.3140 to almost $1.3310 yesterday. It reached $1.3360 today. Follow-through buying could target the $1.3400-40 area. The UK will report Q1 GDP tomorrow. The Bank of England projected a 0.6% expansion in Q1. It had practically stagnated in H2 24. The median forecast in Bloomberg’s monthly survey was for a 0.3% expansion prior to the BOE's update last week. CAD: For the second consecutive session, the greenback ran into offers near the 200-day moving average against the Canadian dollar (almost CAD1.4020). The US dollar pulled back to about CAD1.3930 yesterday and to almost CAD1.3900 today. Monday's low was near CAD1.3895. A push through there could target CAD1.3850. Canada reports March building permits today--hardly a market-mover even in the best of times. After rising 2.9% in February (following a 4.3% decline in January and 12.1% surge in December) a small decline (~-0.5%) is expected. Housing starts and manufacturing and wholesale sales are due tomorrow. They also typically do not capture the market's attention. AUD: The Australian dollar led the G10 currencies higher yesterday with around a 1.6% gain. It recouped in full Monday's losses. Monday's high was near $0.6460, and yesterday, it made a new high, almost $0.6480. It tested $0.6500 today and looks poised to challenge $0.6515, the high for the year set last week. Above there, the $0.6550 area corresponds to the (61.8%) retracement of the sell-off from last September's high (~$0.6940). Australia reports April employment data tomorrow. Australia jobs growth stalled in Q1, rising by about 6.5k after 90k increase in Q4 24 and nearly 112k in Q1 24. Full-time employment has fared a bit better. It grew by 22.5K in Q1 after about 36.5k in Q4 24 and 33.3k in Q1 24. The unemployment rate has been bouncing between 3.9% and 4.1% over the past year. MXN: The dollar unwound Monday's gains against the Mexican peso yesterday. The broad pullback of the dollar and the risk-on mood (e.g., rising equities) saw greenback sold to MXN19.3765 a new low for the year. It peaked near MXN19.6650 on Monday. We had identified the MXN19.37 area as a possible target, but there is little to hang one's hat on until closer MXN19.10. Today, the dollar has been pushed a little through MXN19.35. Mexico's central bank meets tomorrow. With inflation holding (just) inside its 3% +/- 1% target range and the peso's relative resilience; the central bank is widely expected to deliver its third half-point cut of the year. This would bring the target rate to 8.50%. The risk is that the rate cut is accompanied by a statement that suggests Banxico will moderate the pace of its easing going forward. The swaps market appears to be discounting 25 bp cuts at the next two meetings (June and August). The dollar approached BRL5.60 yesterday, its lowest level since the year's low was set early April near BRL5.5935. There is little chart support below there until last October's bottom near BRL5.40. Disclaimer

Overview: The capital markets are continuing to digest the implications of the US-China 90-day cooling off period. There were dramatic moves yesterday, and with a few exceptions, a consolidative tone has emerged today. The domestic US political focus is shifting to the budget, while the May CPI is due today, and it is expected to be little changed. The dollar is softer against the G10 currencies but the Canadian dollar. While there was no follow-through dollar buying after yesterday's surge, the pullback has been rather shallow. Against emerging market currencies, the dollar is mixed. Most of the Asian currencies weakened, though not the Chinese yuan, central European currencies and the Mexican peso. Asia Pacific equities advanced, but there were two notable exceptions: Hong Kong and mainland shares that trade there were off around 2%. The other exception is India, where its main indices are around1.5% lower in late trade. Europe's Stoxx 600 is up about 0.2% after yesterday's 1.2% surge. US index futures are pulling back by 0.3%-0.5%. European benchmark 10-year yields are 2-3 bp higher, while the 10-year US Treasury yield is off a couple of basis points to around 4.45%. Gold has stabilized. After holding $3200 yesterday, it recovered to almost $3266 today and is hovering above $3250 in late morning turnover in Europe. June WTI reached $63.60 yesterday and recorded a low near $61.65 today. It has recovered and is near $62.40. USD: After yesterday’s outsized move, the Dollar Index is consolidating today in the upper end of yesterday's range. It reached nearly 102.00. The 102.10 area is the (61.8%) retracement of the leg lower from late March (that began near 104.70). The 102.60 area is the (38.2%) of this year's decline, and the 103.00 area is the measuring objective of the possible head and shoulders bottom that was forged in recent weeks. Beijing had appeared to demand the end of the so-called reciprocal tariffs as a precondition for talks and that seems to be what has happened, more or less. The US kept the 10% "universal tariff" and the tariff as punishment for fentanyl and China backtracked on its retaliatory tariffs, for 90 days. The US reports April CPI today. The median forecast in Bloomberg's survey anticipates a 0.3% rise in both the headline and core rates. Given the base effect, the year-over-year rates are expected to be steady at 2.4% and 2.8%, respectively. A 0.3% increase in the headline rate puts the annual rate through April at about 2.7%, down from 3.9% in the first four months of 2024. A 0.3% rise in the core rate translates into 3% annualized rate, down from 4.5% in the first four months of last year. The market has already pushed the next Fed fund into September. Lastly, today the US Court on International Trade hears a case challenging the presidential authority to impose tariffs under the International Emergency Economic Powers Act (1970), which does not explicitly grant the president tariff authority. EURO: The euro retraced nearly (61.8%) of its advance since late March (~$1.1055). The $1.1025 area is the (38.2%) retracement of this year's rally. It is consolidating in quiet turnover. It reached $1.1125 but the upside momentum faded. The odds of June ECB rate cut have been trimmed to about 85% from nearly 93% before the weekend. The swaps market is now discounting about 45 bp of easing in the remainder of the year, down from almost 62 bp ahead of the weekend. The possible head and shoulders topping pattern has an initial measuring objective that would bring the euro to around $1.0950. Germany reported improvement in the ZEW survey. The expectations component collapsed in April (-14.0 March and 51.6 in February) but bounced back in May to 25.2. Although the assessment of current conditions weakened for first time this year (-82.0 vs. -81.2). CNY: The US dollar peaked before the weekend near CNH7.2530 and slipped below CNH7.20 yesterday. Last week's low, which was its lowest since last November was near CNH7.1845. It took out briefly today, with the dollar slipping below CNH7.18. The PBOC set the dollar's reference rate at CNY7.1991 (CNY7.2066 yesterday). With the exception of the first two days back from the extended May Day holidays, the PBOC has continued to change the dollar's daily reference rate by slightly more than it had been previously. Today's adjustment of 0.1% is the largest change since April 7. It is still small, and perhaps too small for many observers, but we suspect it is a signal of slightly more flexibility. The only concession China seemed to have made in the weekend talks was to promise (again) to stem the flow of fentanyl and lifted its ban on Boeing planes, JPY: The dollar reached almost JPY148.65 yesterday. It has eased to JPY147.65 today and is knocking on JPY148 in the European morning. The next important chart area is in the JPY149.40-70 area, which houses the (50%) retracement of this year's decline and the 200-day moving average. Tomorrow's PPI is not typically a market mover. The highlight of the week is the first estimate of Q1 GDP. The median forecast in Bloomberg's survey anticipates a small contraction. The swaps market has about 18 bp of tightening discounted for this year, which is around twice as much as a week ago. GBP: Sterling was sold to $1.3140 yesterday. It slightly overshot the (38.2%) retracement of its rally from the April 7 low (~$1.2710) to the April 28 high (~$1.3445) that was found near $1.3165. It is bid near $1.3220 in Europe. The UK reported average weekly earnings slowed slightly to 5.5% in March (from 5.7%), while the measure excluding bonuses moderated to 5.6% from 5.9%. The ILO measure of unemployment ticked up to 4.5% from 4.4%. The number of payrolled employees fell (-33k) for the third consecutive month (and the fifth month in the past six). CAD: The US posted a bullish outside up day against the Canadian dollar yesterday by trading on both sides of last Friday's range and settling above its high. The greenback approached CAD1.4020 to toy with the 200-day moving average. By rising above CAD1.4005, the US dollar took out the (38.2%) retracement of the leg down from the April 1 high (~CAD1.4415) to the last week's low (~CAD1.3750). The greenback remains firm today, having pulled back to only CAD1.3960 before recovering. The (50%) retracement is closer to CAD1.4085. The odds of another rate cut next month have eased to around 62% from almost 67% after the employment report at the end of last week. The unemployment rate r0se to 6.9% from 6.7%, a new post-pandemic high, and a whopping 31k loss of manufacturing employment. AUD: The Australian dollar was turned back from $0.6460 yesterday and frayed $0.6360 and posted an outside down day. However, there was no follow-through selling today. The $0.6360 level held, and it recovered to almost $0.6420. The $0.6435 area may offer a sufficient cap. A break of $0.6350 to strengthen the corrective forces. The five-day moving average slipped below the 20-day moving average, and the momentum indicators have only recently turned lower. The futures market remains confident that the Reserve Bank of Australia will cut the overnight cash rate by a quarter-point when it meets next week. However, the market trimmed the extent of the cuts this year to about 83 bp from 106 bp a week ago. MXN: The US dollar traded on both sides of its pre-weekend range yesterday and settled above last Friday's high (~MXN19.5480). This is potentially a bullish key reversal for the dollar. Last week's position adjustment that lifted the greenback to around MXN19.78, stalled in front of the 20-day moving average. Yesterday, it frayed the 20-day moving average, which is found a little below MXN19.63 today. It is consolidating and the dollar eased to MXN19.5650 so far today. Yesterday, Mexico reported a 0.9% decline in March industrial output. While it was not as large of a decline as expected (median forecast in Bloomberg's survey was -1.4%), it was third decline in four months. The weakness of the economy now seems to be more salient for policymakers than inflation, which is slightly inside the target range. Banxico meets Thursday and is widely expected to deliver the third half-point cut of the year. Disclaimer

Overview: The US and China struck an agreement that would lower tariffs for a 90-day cooling off period. The US tariff on China falls to 30% from 145%, while China's tariff on the US falls to 10% from 125%. A new forum was established to allow recurring discussions on economics and trade. The dollar spiked sharply higher on the news but was quickly sold into the rally, and while it remains sharply higher on the day, it is well off its peak. The Japanese yen is weakest of the G10 currencies, and it is off about in late European morning turnover. The Australian dollar, sometimes treated as a G10 proxy for China, is down the least, less than 0.15%. Most emerging markets in Asia and Europe are weaker. The China yuan and Russian ruble are notable exceptions. Equity markets have rallied on the news, but some markets in the Asia Pacific region closed, like Japan and Taiwan closed before the news was announced. The index of mainland shares that trade in Hong Kong rose by 3%. The calming of hostilities between India and Pakistan lifted local markets by around 3.7% and nearly 9%, respectively. Europe's Stoxx 600 is up around 1%, It is the 13th rising session in the past 15 sessions. US index futures are up sharply, with the Nasdaq up near 3.8% and the S&P 500 up around 2.8%. Bonds have been sold. Benchmark 10-year yields jumped seven basis points int Japan and Australia and are up 6-7 bp in Europe. The 10-year US Treasury yield is up five basis points to 4.43%. Before the weekend, the Fed funds futures were discounting nearly 66 bp of easing this year and are now pricing in 57 bp. The rising dollar and yields have sapped demand for gold. The yellow metal is off more than $100 and is approaching last week; slow near $3200. A break targets $3164. June WTI is extending last week's recovery. A week ago, it approached $55 and today it has pushed above $63.00. Resistance is seen near $65. USD: News of the 90-day cooling off period between the US and China on the trade war helped extend the dollar's upside correction we have been anticipating. The Dollar Index rose to almost 101.80 today. We thought potential existed to 102.00-50. Initial support now may be in100.80-101.00. Attention turns to the CPI and the year-over-year rate is expected to be steady. That is not until Wednesday. On tap today is the federal deficit in the first month of the new fiscal year. Due to tax revenues, the budget is in surplus in April, with the exceptions in 2020 and 2021 due to the pandemic. In April 2024, the surplus stood at almost $210 bln. In Q1 25, the deficit was about $596 bln compared with nearly $555 bln. Ideas that DOGE cuts were going to be substantial and lead to a check to American households always seemed like fantasy and even more so now. Rather than the initial promise of $2 trillion in savings, independent auditors put it at around $2 bln and that does not appear to include the loss of tax revenue from the cuts in the IRS auditors. News reports suggest 280k federal workers and contractors have been laid off, but it has yet to be seen in the data. EURO: The euro has been sold to about $1.1085 before stabilizing. We have been looking at a target near $1.1050. It recovered to almost $1.1150. Resistance may be in the $1.1180-$1.1200 area. With a 3% jump in German industrial production in March and a 0.9% rise in Spain's the risk in on the upside for the aggregate figure due on Thursday. Ahead of it is tomorrow's German ZEW survey. The expectations component collapsed in April (-14 vs. 51.6), and we will see if it was a fluke. The current assessment rose in each of the first four months of the year but remains in the trough. CNY: The dollar briefly poked above CNH7.25 ahead of the weekend and was repulsed and sent to new session lows near CNH7.2340. It briefly traded below CNH7.20 today. Last week's low was near CNH7.1845. After setting the dollar's reference rate lower for seven consecutive sessions, the PBOC set it higher in the last two sessions but lowered its again today (CNY7.2066 compared to CNY7.2095 before the weekend) China reported continued deflationary pressures. The April CPI was -0.1% year-over-year, the same as in March, though core prices rose 0.5%, also the same as in March. Producer price deflation deepened to -2.7% from -2.5%. China cut rates last week and the deflation will boost calls for fiscal measures. Separately, China reported a record current account surplus of $165.6 bln in Q1. It reported a $424 bln surplus in 2024 and $263.4 bln surplus in 2023. JPY: The greenback was turned around JPY146.20 before the weekend, its best level since April 10. It was sold to about JPY144.85 before buyers emerged. It overshot out technical objective (~JPY148) to reached nearly JPY148.25, perhaps encouraged by the jump in US rates and the tougher trade stance by Prime Minister Ishiba indicating that Japan will not accept a trade deal that excludes autos, and that it won't sacrifice is agriculture sector to protect autos. Japan reported another large current account surplus for March. The JPY3.7 trillion surplus follows the record JPY4.06 trillion in February. Two-thirds of the decline can be accounted for by the smaller trade surplus (JPY516.5 bln vs. JPY713 bln). GBP: Sterling held support in front of $1.32, a three-week low, before the weekend and recovered to nearly $1.3320. It was sold to $1.3160 today, which meets the (38.2%) correction of the leg up from the April low (~$1.2710). The 50% retracement is near $1.3075. A message the swaps market took from last week's Bank of England meeting is that there was less a chance of a cut at next month's meeting. At the start of last week, the market had about a 70% chance of four cuts this year and now it is discounting about a 10% chance of three more after the BOE's rate cut. This week's data--March/April UK employment report and the first estimate of Q1 GDP, with March details. CAD: The 0.2% rise in the April unemployment rate (to 6.9%) and the 31k loss of manufacturing jobs, concentrated in the auto industry, weighed on the Canadian dollar. It was the only G10 currency that was unable to gain against the greenback before the weekend. The odds of a June rate cut rose to about 60% from less than 50% the previous day. Now it is around. 55%. The US dollar set a new low for the year last Tuesday near CAD1.3750 and approached CAD1.3945 at the end of last week. It is recording an outside day today, having traded on both sides of the pre-weekend range. It reached CAD1.3980 today. The next important chart area is CAD1.4000-20. Above there, the next hurdle is near CAD1.4080. AUD: The week begins slowly with confidence surveys, while the highlight, April's employment report is due Thursday. Last week's high was set on Wednesday near $0.6515, the high for the year. However, it reversed lower and fell to almost $0.6370 ahead of the weekend. It caught a bid and briefly traded above $0.6430 in North America. It spiked to $0.6460 on the details of the US-China deal but was quickly sold to nearly $0.6390 before steadying. Initial resistance may be in the $0.6420 area. Options for A$425 mln at $0.6350 expire today. MXN: With last week's CPI report showing inflation remains within the targeted range even if barely the weakness of the economy justifies a half-point cut at this week's central bank meeting. The resilience of the peso should also give the officials some comfort. The dollar fell to its lowest level in seven months against the peso ahead of the weekend. Initially, the dollar's losses were extended to almost MXN19.42 before the broad demand lifted it to almost MXN19.58. It has traded on both sides of the pre-weekend range and a close above Friday's high (~MXN19.5480) would lift the technical tone. The MXN19.60 area marks the halfway point of the leg down from last week's high near MXN19.7820. Disclaimer

Many seemed optimistic that the weekend trade talks between the US and China will de-escalate the tension. We are less sanguine. Even if the tariffs on both sides were halved, there would still be an effective bilateral embargo. In the larger picture we are concerned that blocking PRC's exports and denying it a direct investment strategy as an alternative will ultimately not lead to significant reforms in Beijing but will strengthen nationalism and create a more determined and aggressive adversary. It was not out of affection for Berlin that Keynes warned against the bleeding of Germany after WWI. It is in a similar realpolitik vein that we encourage caution of what could be a more powerful containment than the more than 60 distinct military bases that the US has in the area. Although the dollar made 3–4-week highs against most of the G10 currencies, the lack of follow-through leaves it within the broader consolidative ranges that have dominated. The Federal Reserve noted that risks had increased on both of its mandates. It clearly and firmly reiterated there was no urgency to adjust policy given the profound uncertainty continuing to arise from US policy. Other central banks, including the ECB, the Bank of England, the Swiss National Bank, the Bank of Canada, the Antipodean central banks, and Sweden's Riksbank are expected to cut rates at least once before the Federal Reserve. The week ahead highlights include what is expected to little changed US CPI readings, Japan and the UK's first estimates of Q1 25 GDP, the UK and Australia's latest employment report, and a 50 bp rate cut by the central bank of Mexico. Meanwhile, leaders in both India and Pakistan appear to prepared to pause hostilities even as they further mobilize. US Drivers: Both macro-economic and technical considerations appear to favor greenback. The resilience of the US labor market means that most of the other G10 central banks, leaving aside the Bank of Japan, will likely cut rates again before the Fed's easing cycle resumes. The dollar sold off from mid-January through late April/early May. A corrective phase appears to have begun. We remain concerned about the a confluence of negative developments in the coming weeks, including the supply shock coming from the effective embargo of Chinese goods with prohibitive tariffs, the boycott of US brands in Canada and Europe, the dramatic reduction in forward booking by tourists, the coming crunch from government layoffs and cooling of immigration, the resumptions of student loan servicing, and the cooling effect of the economic uncertainty amid a precipitous drop in consumer confidence. Yet this may only be evident in the data that is reported in July, and more likely, August. Data: The week ahead features what is expected to be little change in the year-over-year rate of April CPI (2.4%) and firm retail sales, helped by effects to avoid the tariff, and firmer industrial output after the 0.3% decline in March. Housing starts are also expected to rebound after the heady 11.4% drop in March. Between the end of the FOMC meeting and when Fed Chair Powell speaks on Thursday, May 15, nearly half of his colleagues would have already spoken. Prices: The Dollar Index reached a four-week high before the weekend but was unable to sustain the upside momentum. Still, it settled above 100.00 on a weekly basis for the second consecutive week and rose for the third straight week. A move above 101.30-40 signals a continued correction with a 102.00-20 area target. The momentum indicators continue to recover. A break of last week's low (~99.15) would undermine the corrective tone. EMU Drivers: The 14.25-cent euro rally from early February through April 21 is over. The question now is whether it consolidates--moving broadly sideways that alleviates the overbought technical condition or whether it needs a proper correction. Fundamentally, the resilience of the US jobs market means that the ECB will cut again before the FOMC resumes its easing cycle. The widening US two-year premium over Germany often offers the dollar support. It has risen by about 20 bp since the end of April. Data: The US economy contracted by 0.3% in Q1 at an annualized clip, while the eurozone economy grew by about 1.6% annualized. The update this week will provide more details of European growth. Economists project growth in Q2 will be about half of the Q1 pace. The German ZEW survey may draw some attention. The assessment of the current situation has improved in each of the first four months of the year, but at -81.2 in April, it is still dismal. The expectations component collapsed in April, falling from 51.6 to -14.0; from the high since January 2022 to the low since July 2023. Prices: The euro found support ahead of the weekend slightly below $1.12, a four-week low. The five-day moving average fell below the 20-day moving average last week for the first time since early April. The $1.1150 area is the halfway point of the rally since the late March low near $1.0735. The next retracement (61.8%) is near $1.1050. A move above the $1.1300 area would suggest continued consolidation rather than a downside correction. China Drivers: Officials seem to be willing to accept some paring of the yuan's recent gains against the dollar. The US practical embargo against Chinese goods will act as headwind on the economy, even though Beijing is rolling back or selectively not enforcing the tariffs previously announced on some US goods. The point is not to signal a retreat as much as to minimize the self-inflicted harm. Without more stimulus so domestic demand can make up from some of the loss US demand, China risks antagonizing its other trading partners by shifting exports from the US. Data: China's April inflation reports were in line with expectations. Consumer prices fell 0.1% year-over-year, the same as in March. Consumer goods (-0.3% vs. -0.4% in March) and food prices (-0.2% vs. -1.4%) fell for the third month year-over-year. Non-food prices were flat and core (excluding food and energy) rose by 0.5% (that same as in March). It is difficult to see how China will achieve its 2% inflation target this year. It was 0.2% in 2023 and 2024. Still, we note that Switzerland reported April CPI last week and its was zero month-over-month and year-over-year. The core rate was 0.6%. China's producer prices fell 2.7% year-over-year after a 2.5% decline in March. It is the most deflation in six-months. China has been experiencing deflation in producer producer prices since September 2022. China may provide April lending figures and foreign direct investment flows. Aggregate lending in Q1 was about 18.5% higher than Q1 24. Another way to look at it is that through March, the combination of lending from the formal banking system and from the shadow banks, surpassed what was lend through May 2024. Given the tariffs one may not be surprised by news the foreign direct investment into China is weak. Yet, the last time it rose on a cumulative year-over-year basis was in May 2023. The de-risking had already begun but also note that retained earnings count as direct investment. There may be several considerations for handling retained earnings. Cyclical factors, like low interest rates, may influence the decision. Prices: The dollar's high for the week was set ahead of the weekend near CNH7.2530. The upside momentum was not sustained and the dollar pulled back to CNH7.2340. Chart support may be in the CNH7.2225-50 area. On the other hand, push above CNH7.26 could spur a move toward CNH7.30. Japan Drivers: The correlation between changes in the exchange rates and changes in the US 10-year yield remains near the weakest since Nov 2023. On a rolling 30-day basis, it is below 0.20, having spent Q1 between 0.50 and 0.70. The rolling 60-day correlation is below 0.30. It was above 0.60 as recently as early April. The yen is trading a bit more like a risk currency in the sense that the 30-day correlation with the S&P 500 is a little above 0.40, the strongest since mid-2023. Most notable is that the yen's movement has become increasing a function of the dollar's broader changes. The 30-day correlation of the changes in the exchange rate and the Dollar Index is near 0.88, the highest since 2016. Data: Japan reports Q1 25 GDP. It likely slowed considerably after a 2.2% annualized pace in Q4 24. The median forecast in Bloomberg's survey is for a 0.2% annualized pace in Q1 25. Net exports may have been a drag, while private investment and public consumption probably slowed. Industrial output was virtually flat. Japan will also report the March current account, alongside which is a country breakdown of its foreign bond purchases and sales. but the report will not shed light on what some thought was foreign-led selling of US assets in early April. Weekly MOF data showed large bond sales in the week ending April 4 (~JPY2.6 trillion, ~$17.5 bln). The rest of April was nearly flat. In the week ending April 4, Japanese investors were substantial buyers of foreign equities (~JPY1.8 trillion) and were modest net buyers through April 25 (~JPY980 bln). Prices: The dollar reached four-week highs against the yen ahead of the weekend near JPY146.20. It was turned back and fell to almost JPY144.80 in the waning hours of the week's activity. We had thought the bottoming pattern projected toward JPY148, but for the past two weeks the JPY146 area contained the greenback. We are also monitoring a down trendline connecting the January and March highs, which is found near JPY146.90 on Monday and around JPY146.35 at the end of the week. UK Drivers: Sterling and the euro tend to move in the same direction against the dollar. The 30-day correlation of the changes in the two exchange rates is around 0.75. The 60-day correlation is closer 0.80. It has not been below 0.75 this year. After last week's rate cut and official comments, the market discounted a more gradual easing path. It is now pricing in a year end rate around 3.65%, about 10 bp higher on the week (now: 4.25%). The US-UK trade deal does not seem to impact either economy very much, but the consequences seem to be at least two-fold. First, it further pulls the UK from the EU, and second, it may make trade talks with others, who object to the range of tariffs, including the so-called reciprocal tariffs, which the UK was not subject. Data: The key to next month's BOE decision is unlikely to rest on the upcoming data. The highlights are the jobs report and Q1 GDP and real sector data for March. The economy is expected to have grown by 0.3% in the Jan-Mar period after practically stagnating in H2 24. Consumption and business investment look weaker. Manufacturing output may have continued to contract. However, the BOE's forecast was considerably more optimistic with a 0.6% quarterly expansion projected, though nearly stagnating this quarter. Prices: Sterling approached $1.3200 ahead of the weekend, its lowest level since April 17, and recovered to nearly $1.3325. The momentum indicators are falling, and the five-day moving average is now below the 20-day moving average. However, the price action is still consistent with a consolidative phase rather than a correction. Sterling did not trade above $1.3400 last week, and the high was set in late April near $1.3440. Canada Drivers: The Canadian dollar also continues to seem to be more a function of the broader movement of the US dollar. The rolling 30-day correlation with changes in the Dollar Index is above 0.70 for the first time in six months. Sometimes, the Canadian dollar is more of a risk currency with a stronger correlation with changes in the S&P 500, but the 30-day correlation is below 0.30. Data: With the April jobs data behind us and the CPI due later in the month, real sector data this week is mostly from the housing sector (starts and permits, and existing home sales). At the end of the week, Canada reports March portfolio flows. Canada enjoyed net inflows that averaged C$16.0 bln a month in 2024, which was more than the monthly average of 2022 and 2023 combined. That said, net inflows slowed to a trickle in the first two months of 2025 and are the weakest since Jan-Feb 2004. Prices: The 0.2% rise in Canada's April unemployment rate to 6.9% and a loss of 31k manufacturing jobs, the most since January 2009, outside the pandemic, weighed on the Canadian dollar. It was the only G10 currency not to have risen against the US dollar ahead of the weekend. The greenback held above CAD1.3900. The momentum indicators are still favorable and the CAD1.4000-30 area remains a reasonable near-term target. Support is seen in the CAD1.3850-70 area. Australia Drivers: The Australian dollar seemed to benefit from the US dollar's broad weakness and optimism that US-China trade war has reached some sort of extreme tantamount to an embargo. But the push above $0.6500 was repulsed, what seemed like an exhaustive move with a bearish technical sign warned short-term trend followers and moment traders to begin moving to the sidelines. The 30-day correlation between changes in the Australian dollar and the offshore yuan is near 0.50 only slightly higher than with the Dollar Index. Still, the correlations with the dollar-bloc (Australia, New Zealand, Canada) are above 0.75. Data: The last important high-frequency data points before next week's central meeting are the May consumer inflation expectation survey and the April employment report. The Melbourne Institute's consumer survey showed a jump in March to 4.2%, the highest for the year and matching the most elevated reading since last September. Nevertheless, over the past month, the Australian yield has fallen sharply, and the yield curve has steepened (bullish steepening). Meanwhile, overall job growth practically stalled in Q1 (<7k), the weakest quarter since Q3 21. Full-time employment grew by 9k in Q1 25, after 31k in Q4 24 and nearly 132k in Q1 24. Prices: After rising to $0.6515 in the middle of last week, the Australian dollar posted a key downside reversal and fell to almost $0.6370 ahead of the weekend. It recovered smartly and reach almost $0.6435 in the North American session, perhaps encouraged by speculation that the weekend US-China trade talks mark the beginning of the de-escalation. Initial resistance may be found in the $0.6440-60 area. Disappointment with the outcome, of the weekend trade talks, especially if the effective embargo is not lifted, the Aussie can be sold in disappointment with support extending into the $0.6350-$0.6370 area. Mexico Drivers: The peso often trades like a risk currency (30-day correlation of ~0.65 with the changes in the S&P 500) that is also somewhat protected by a still wide interest rate premium. The peso is one of the few emerging market currencies that trade 24 hours a day. It is sometimes used as a proxy for less liquid emerging market currencies. Data: The central bank meeting is on May 15. It cut rates five times last year in quarter-point steps to 10.0%. It has cut another 100 bp this year in two half-point steps (9.0%). The weakness of the economy and the resilience of the peso may give the central bank scope for another 50 bp move. The swaps market is pricing in a terminal rate around 7.25% by this time next year. Prices: After being turned back from almost a three-week high on Tuesday (~19.7820), the greenback was sold to nearly MXN19.4350 ahead of the weekend and it closed below MXN19.50 for the first time since last October. . The next important chart area is near MXN19.37, which corresponds to the (38.2%) retracement of the rally that began last April (~MXN16.26) to the February high (~MXN19.29). A break of that could target the MXN19.00-5 area. Disclaimer

Overview: After recovering impressively yesterday, the US dollar saw some follow-through buying initially but has reversed lower and is paring yesterday's gains against the G10 and most emerging market currencies. East Asian emerging market currencies that had surged have now traded lower for the past three sessions. The main talking point today is tomorrow's trade talk between the US and China. The mutual tariffs are so high that even if they were halved, they would still be prohibitive. China's April trade figures show it was able to more than replace the loss of exports to the US and overall Chinese exports rose. While China has replaced US demand, at least initially, now attention may turn to whether the US can replace Chinese supply. The drying up of container shipments suggests not so quickly. The US economic calendar features nine Federal Reserve officials, but there is little that will be said that would encourage investors to bring forward a rate cut to next month. Asia Pacific equities are mixed, with China, South Korea, and India among the losers, while Japan, Taiwan and New Zealand, the Philippines, and Pakistan markets rising by at least 1%. Europe's Stoxx 600 is up almost 0.5% and is poised to settle higher on the week. US index futures are firm after yesterday's strong gains. The sharp sell-off in US Treasuries yesterday helped drag yields higher today. In Japan and among the Antipodeans, the 10-year yields rose 4-5 bp, and in Europe, they are up mostly 4-6 bp. The 10-year US Treasury yield is little changed near 4.37%. Gold is trading firmer after falling by $125 in the past two sessions after rallying $190 in the first two sessions of the week. June WTI has fully recovered from the drop to nearly $55 on Monday. It is pushing above the 20-day moving average near $60.80 for the first time in a couple of weeks. USD: The Dollar Index reached its best level in nearly four weeks yesterday around 100.75 and settled close to the session high. The gains were marginally extended today to around 100.85 before being knocked back to 100.35 by early European turnover, where it stabilized. A close below 100.00 would be disappointing. There are nine Fed officials that will be speaking throughout the day in a session devoid of economic reports. Still, there seems to be little that can be said that will substantially boost the odds of a cut at the next FOMC meeting in June. Attention next week turns to inflation and both the headline and core CPI look fairly steady. The weekend sees US-China trade talks. Expectations seem to be for de-escalation, but we are less sanguine. Even if the tariffs are cut in half, wouldn't it still be tantamount to an embargo? Even talks with Japan, which have been fast-tracked, are not expected to result in an agreement until next month at the earliest. Japan wants to all the tariffs to be on the table, but the US seems to only want to discuss the so-called "reciprocal tariff." Note that around the time that the postponed tariffs come into effect will coincide with Japan's upper house election in July. Meanwhile, China wants a broad agreement, and its red lines respected. Trump administration officials are still playing down the impact of the effective trade embargo. Treasury Secretary Bessent has suggested China is playing poker with a "pair of twos," i.e., a weak hand, which may risk violating a cardinal principle to not under-estimate a rival. EURO: The euro has broken down, out of what was a choppy consolidation. It slipped briefly through $1.12 today for the first time since April 11 but found bids to lift it back to $1.1260. This former support should act as resistance and a close above there would leave it apparently still rangebound. Still, the euro settled slightly below $1.13 last week, and barring a stronger recovery, it will finish lower for the third consecutive week. In terms of macro data, outside of Germany's ZEW survey next week, the economic calendar is limited to Q1 data in the coming days. CNY: The dollar's broad recovery saw it rise to about CNH7.2470 yesterday and to almost CNH7.2530 today. The next technical hurdle ahead of CNH7.30 may be around CNH7.26. For the second consecutive session, the PBOC set the dollar's fix a little higher (CNY7.2095 vs. CNY7.0273 yesterday), which would seem to be a potential signal of willingness to accept a stronger dollar/weaker yuan. China has shown in the first instance that it was in fact able to replace the drop in US demand. China's exports fell by 21% to the US in April but rose overall by 8.1%, with stronger exports to India, Southeast Asia, and the European Union. Imports from the US fell by nearly 14% but fell only 2% overall. China will report April CPI and PPI early Saturday. According to the median forecasts in Bloomberg's survey the CPI should be steady at -0.1% and the deflation in producer prices may deepen (-2.8% vs. -2.5%). JPY: The dollar posted its highest close in nearly a month yesterday around JPY145.90. The trendline from the mid-January high (~JPY158.90) and late March high (~JPY151.20) comes in today at about JPY147. It has not been able to rise through yesterday's high near JPY146.20 and has retreated to almost JPY145.00. A close below JPY145 would weaken the technical tone. Japan reported slower growth in labor cash earnings (2.1% in March from 2.7% in February). When adjusted for inflation real cash earnings fell 2.1% year-over-year. Last March, they had also fallen by 2.1% year-over-year and in March 2023, they were 2.3% lower. Household spending jumped 2.1% in real terms year-over-year, considerably stronger than expected. It contracted by 0.5% in February. Japan reports its first estimate of Q1 GDP next week. The median forecast in Bloomberg's survey is for a 0.1% contraction, with net exports a drag on growth and offset slightly by a contribution of inventories. Private consumption looks a little better after today's report. It was flat in Q4 24. GBP: Sterling broke down yesterday, lending credence to the topping pattern that appears to have formed. It fell to about $1.3210 today before recovering a little through $1.3270. A close above $1.3260 would suggest further consolidation is likely. As widely expected, the Bank of England delivered a quarter-point cut yesterday (to 4.25%). The market's takeaway is that the easing will be more gradual. The market sees the year-end base rate around 3.64% (from 4.25% now). It settled last week near 3.53%. Next week, the UK reports on jobs data and Q1 GDP and details. The economy is expected to have expanded by about 0.3% after nearly stagnating in H2 24. CAD: The US dollar rose to nearly CAD1.3935 yesterday, its best level since mid-April. It reached a marginal new high today in front of CAD1.3945 before it lost its mojo and was pushed back to CAD1.3910 in European turnover. The next technical area is around CAD1.40. The area houses the 200-day moving average and the (38,2%) retracement of the early April high (~CAD1.4415). The greenback is up around 0.75% this week, which is sustained, would be the best weekly performance since the end of February. April employment data will be released today. Some stabilization is expected after Canada's employment shrank by 32.6k in March. The participation rate may tick up and this may lift the unemployment rate to 6.8%, which would be the highest since 6.9% last November. Canada lost about 46k full-time in Q1 25, which is nearly as many as it had gained in Q1 24. The swaps market straddles the fence on the outlook for the June 4 central bank meeting ahead of today's report. AUD: After posting the key reversal on Wednesday, follow-through selling yesterday saw it hover in the $0.6400 area. Options for A$1 bln expire there today. It fell to almost $0.6370 today before returning to the $0.6400 area. The 20-day moving average, which it has not traded below since mid-April, is there today.. Still, some may not become convinced that a high is in place until the $0.6350 area yields. Although some confidence surveys and the index of wages, labor costs, and productivity are due next week, the highlight is the April employment report next Thursday. Full-time employment grew by 9k in Q1 25 after rising nearly 132k in Q1 24. The unemployment rate stood at 4.1% in March 2025, up from 3.9% in March 2024, which can largely be accounted for by the increase in the participation rate (from 66.5% to 66.8%). MXN: The peso remains resilient, perhaps encouraged by the risk-on environment. The peso rises and falls with the S&P 500. The rolling 30-day correlation of the changes is nearly 0.65, the most since late 2023. Given the carry, it looks as if some large positions that were using maybe the offshore yuan, or other Asian currencies to fund long Latam positions like the peso. And the dollar did rise a bit through MXN19.78 on Tuesday but there were no follow-through gains. Instead, the greenback returned to almost MXN19.51 yesterday and edged a little closer to MXN19.50 today. Despite fraying the area on an intraday basis last month, the dollar has not closed below there since last October. Mexico reported a rise in both the headline and core CPI measures for last month yesterday, but it is unlikely to deter the central bank for delivering another 50 bp rate cut next week. Today's data is limited to April vehicle production and exports. In March, Mexico exports almost 88% of the autos its produced. In March 2024, Mexico exported nearly 95% of its auto production. Disclaimer