Together with JPY, USD topped the G10 currency board yesterday, which send the DXY dollar index to the highest point since June 2017. The move appeared to be led by flows into US equity and treasury markets, which also sent the S&P500 to new all-time highs while solid demand for a 2-year treasury auction may have provided another push as well. Yesterday’s dollar strength fits the narrative of relatively strong growth in the US, while the rest of the world cools down more. Part of the move was due to treasury inflows from Japan prior to the 10-day long holiday, called Golden Week,  but also due to falling inflation expectations signalling that the Fed may become even more accommodative in the future.


Sterling closed below its 200-day moving average yesterday as the dollar reigned supreme in another trading session. The backbench 1922 committee convened last nights meeting with no decision on whether to change the rulebook to open the door for another attempt at removing Theresa May from power. A final decision is expected today by Chairman Graham Brady as the Tory party still battles with deep division over changing the 12-month grace period. With cross-party talks bearing no fruit just yet, today’s PMQs may avoid the contentious subject. With little scheduled on the data calendar this week for sterling, and no progress on Brexit negotiations in the immediate horizon, sterling may continue to trade downwards as it remains susceptible to the broad risk-off move in FX markets.


The single currency embarked on another bottom-exploring mission yesterday as it descended towards the lower end of the trading range against USD, coming scaringly close to 22-month lows. The Flash Consumer Confidence Indicator for the Eurozone edged down slightly to -7.9, which is still well above the long term average of -11.3. Interesting as consumer confidence gauges may be, the real question is how this translates into consumer spending, for which we will have to wait until for example retail figures are released again in May. The German Ifo Business Climate is due at 9:00 BST, giving another update on economic sentiment in Europe’s largest economy.


The loonie couldn’t catch a break yesterday and fell 0.7% on the day against a roaring US dollar. Commodity-linked currencies within the G10 such as NOK and AUD also sat at the bottom of the G10 currency board. The loonie continues to take on water this morning, ahead of the Bank of Canada rate decision at 15:00 BST today, where Governor Poloz is expected to point towards weakening economic dynamics to maintain the bank’s current wait-and-see stance. The idea of the Bank of Canada converging towards the neutral policy level of 2.5-3.5%, something that was voiced back in October by Governing Council, will come back into focus today with a fresh quarterly economic report and projections. Many expect this neutral policy range to be downgraded, potentially by 50 basis points, pointing towards a net dovish announcement. However, with expectations remaining low, the bar for the Bank of Canada to jump over to surprise to the upside remains low, especially with oil prices back to the level they were last at during the October hike.