- Bank of Japan intervenes and sells USDJPY
- WTI oil steady but firm
- The US dollar opened slightly mixed but finished down across the board for the week.
USDCAD open: 1.3575, overnight range 1.3571-1.3588, close 1.3580, WTI 105.49, Gold 4,582.17
The Canadian dollar rallied yesterday as broad US dollar selling took hold, with surging crude prices adding to the downward pressure. April's strong S&P 500 performance triggered month-end rebalancing flows, forcing portfolio managers to offload US dollars. Trading was subdued overnight with most European centres closed for May Day.
On Wednesday, Bank of Canada Governor Tiff Macklem signalled that rate hikes remain on the table this year. Markets have taken note, pricing in an 89% probability of a 25 bp increase in September.
WTI is steady at 105.54 in New York, a gain of 9.12% on the week, after overnight trade spanned a 104.15-106.62 range. Trump continues to insist a deal with Iran is possible but has drawn a hard line on nuclear capability.
The US dollar spent the overnight session in narrow, directionless trade but is on track to close the week with heavy losses across the board.
Japan's Topix ended the Asian session little changed, while other major regional indexes sat out the day on May Day holidays.
At 7:30 am, the UK FTSE 100 is off 0.56%, with the German DAX and French CAC 40 shuttered for the holiday. S&P 500 futures are 0.13% higher, the 10-year Treasury yield stands at 4.386%, the DXY is at 97.95, and gold (XAUUSD) is fetching 4,575.75
EURUSD nudged between 1.1719 and 1.1748 in a quiet session with much of Europe sidelined for the holiday. The ECB held rates steady as anticipated and gave no indication that would shake market conviction in a June rate hike, with odds holding firm at 90%. Further EURUSD gains could be capped if oil prices keep climbing.
GBPUSD drifted in a 1.3487-1.3523 range as the prior session's rally gave way to consolidation in thin holiday conditions. The Bank of England held rates at 3.75%, with Chief Economist Huw Pill the sole dissenter, pushing for a 25 bp increase. Governor Bailey emphasised caution given persistent inflation uncertainty and the risk of a sharp economic slowdown. UK Manufacturing PMI edged up to 53.7 in April from 53.6, aided in part by front-loading of purchases ahead of anticipated cost pressures.
USDJPY collapsed through a 155.50-157.33 range after the Bank of Japan seized on the quieter May Day session to intervene and reintroduce two-way risk. The move followed repeated verbal warnings from officials over speculative positioning. Even so, intervention does little to resolve the yen's structural problem -- the wide gap between US and Japanese interest rates continues to favour the dollar, and rising oil prices compound the pain for an import-dependent economy. Tokyo inflation came in marginally below expectations while Manufacturing PMI edged up to 55.1 from 54.9.
AUDUSD held a 0.7184-0.7206 range, drawing support from generalised US dollar weakness, resilient commodity prices, and growing expectations that the RBA will raise rates on Tuesday. Australian Producer prices eased to 3.0% y/y from 3.5% the prior month.
Today's calendar features US ISM Manufacturing PMI, with the market looking for a read of 53 against a prior print of 52.7.
