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USD
The dollar index slipped sharply on Wednesday as markets interpreted comments from Washington about “great progress” in peace negotiations with Iran as a potential turning point for the Gulf conflict. That narrative, together with another sharp drop in USDJPY on suspicions of renewed Japanese intervention, prompted investors to cut long‑dollar positions. Nevertheless, we remain sceptical about the durability of this move given prior episodes of premature optimism, and our view that Japanese fundamentals warrant a softer yen. Those factors aside, unit labour costs, initial jobless claims, and a raft of Fed speak tops the docket today, ahead of Friday’s payrolls report. Absent any major surprises from the week’s remaining events, we would expect the greenback to retrace yesterday’s losses heading into the weekend.
EUR
The euro regained its footing on Wednesday, climbing back above 1.17 as the dollar weakened across the board and volatility in USDJPY spilled over into other crosses. Still, with the eurozone data calendar light, we still see little reason for sustained euro upside. ECB speakers have continued to counsel caution, doing little to endorse a further acceleration in rate-hiking bets. That theme should continue today with a calendar featuring speeches from several ECB officials alongside rate decisions in both Sweden and Norway. These events are unlikely to shift the needle, leaving us to anticipate a defensive EURUSD ahead of tomorrow’s US payrolls data.
GBP
Sterling managed a modest rebound yesterday, breaching the 1.36 level against the dollar as risk appetite improved. Even so, Wednesday’s move merely reversed Monday’s slide, and we continue to doubt the pound’s ability to sustain rallies while the Middle East conflict keeps energy costs elevated and risk sentiment fragile. Our week‑ahead briefing highlighted that today’s local elections pose an additional risk for GBP if results trigger another round of internal Labour Party strife, though this will only become clear as results emerge tomorrow morning, leaving sterling in limbo for now. With no major UK data releases due today, we expect GBPUSD to trade heavily, with traders also looking ahead to Friday’s US payrolls and next week’s UK GDP and labour market figures. Unless there is a meaningful de‑escalation in the Gulf or a sharp fall in US yields, upside in sterling should remain capped.
CAD
The Canadian dollar whipsawed on Wednesday, with USDCAD briefly dropping below 1.36 as optimism around US‑Iran talks buoyed risk assets before retracing when oil prices slipped back, and peace deal optimism faded. Looking ahead, today’s domestic calendar is quiet, leaving the currency to take its cue from US data and risk sentiment. Tomorrow’s April employment report is the next major event for Canada. Consensus looks for just 5k jobs added after March’s 14k gain, with the unemployment rate expected to hold at 6.7%, albeit we see risks that one or both could disappoint expectations. Weaker prints would undermine expectations for Bank of Canada tightening and could see USDCAD return toward the upper end of its recent 1.35–1.37 range. In the meantime, continued uncertainty over Middle East hostilities and energy prices suggests the pair will remain range‑bound.