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USD
The dollar extended its winning run yesterday, with the DXY pushing up towards 98.5 in a third consecutive session of gains. The move higher was helped by April PPI, which showed prices rising 1.4% MoM (consensus 0.5%) for a 6.0% YoY pace, the hottest since 2022. Core PPI jumped 1.0% MoM – more evidence that the energy passthrough from the closed Strait of Hormuz is now showing signs of spreading beyond the headline numbers. Taking all that into account, markets have now fully priced out 2026 Fed cuts, with around a 35% probability assigned to a hike by December, validating the “Fed on hold for longer” view we have argued for in recent weeks. The Senate confirmation of Kevin Warsh as Fed Chair passed without market drama, allowing traders to take stock of wider events. Today, focus turns to US retail sales (April) and jobless claims at 13:30 BST, alongside the optics of the Trump-Xi summit currently underway in Beijing. With Iran rhetoric still hardening and Brent stubbornly above $105, we continue to view the dollar as tactically supported, particularly against energy-importing G10 peers.
EUR
EURUSD ground lower again yesterday, slipping further into the low 1.17s, with both the soft eurozone Q1 GDP flash at +0.1% QoQ and a disappointing eurozone industrial production print compounding the dollar-driven downside. Lagarde’s remarks yesterday leaned cautiously hawkish but did little to arrest the slide, with the energy import bill and a softening growth picture overwhelming the rate-differential story. Today is Ascension Day across much of the continent, meaning European liquidity will be thin and price action prone to amplification. With no top-tier domestic data due, the euro is left at the mercy of the US retail sales print, headlines from the Beijing summit, and any further Iran developments. Risks remain skewed lower, and we would not rule out a break below 1.17 if Brent extends gains or US data prints firm.
GBP
Sterling underperformed again yesterday, with GBPUSD slipping into the low 1.35s as the combination of a firmer dollar and ongoing Starmer leadership noise weighed. Gilt yields remained elevated, with the 10-year above 5% and longer-dated yields probing 26-year highs, reflecting fiscal sustainability concerns that undermine the usual rate-differential support for the pound. This morning’s UK data dump was a mixed bag: Q1 GDP printed in line at +0.6% QoQ, with March surprising to the upside at +0.3% MoM against expectations of a -0.2% contraction, providing a small lift through the early session. However, the release “largely reflects old news” — Q2 is where the Iran-war terms-of-trade hit will bite, and the simultaneous labour market data will be parsed for early signs of cooling. We continue to doubt sterling’s ability to sustain rallies against this combination of political risk, an unhelpful energy backdrop, and softening forward-looking indicators. With US retail sales also due and the Beijing summit running, two-way risk dominates, but the path of least resistance remains lower.
CAD
The loonie traded heavily again yesterday, with USDCAD pushing back above 1.37 as the firmer dollar and the unwinding of any residual BoC tightening hopes weighed, even as WTI held near $100. As we noted at the start of the week, the two competing forces — an oil-price floor on one side, a broad dollar bid and softer domestic momentum on the other — continue to net out in favour of modest USDCAD upside. BoC meeting minutes did little to move the needle for the pair late in the session. Today’s Canadian calendar is bare, leaving the loonie hostage to US-centric developments. We expect USDCAD to remain anchored near 1.37 with an upside skew, though a meaningful Brent rally on further Iran escalation could provide a temporary loonie reprieve. For now, the broader Middle East-driven dollar bid still trumps the oil channel.