Dollar sinks back near to cycle lows on quiet trade news
Updated Updated Mon, 2025 April 28 08:37
* Wall Street mixed to start busy week of earnings, data
* Greenback struggles as it consolidates near recent 3-year lows
* ECB prepares June rate cut amid trade drag
* Trade deal news hots up as we near 100 days of Trump’s presidency
FX: USD sold off on little major news, while a manufacturing index fell to its lowest since May 2020. The report was full of concerns around tariffs and economic uncertainty. Fed officials are in their blackout period ahead of the FOMC meeting on May 7. The key dollar pivot point remains 99.57 with the recent 3-year low at 97.92. Latest positioning data shows hedge funds talking profits on short USD positions.
EUR lagged most of its peers as it tried to get a stronger foothold above 1.14. ECB comments from across the Governing Council continue to be dovish with comments from Knot and Villeroy flagging disinflationary pressures. Rate setters may also be worried about the strong euro, where the nominal trade-weighted single currency is at record highs, up 4% year-on-year. Currency strength is not what a big exporter wants right now.
GBP was vying for top spot with the yen as cable made fresh 3-year highs above 1.3434, the September 2024 top. There are no major data releases scheduled ahead of the May 8 Bank of England policy decision. Markets are pricing 27bps of rate cuts and just over 90bps of cumulative easing by December.
USD/JPY moved lower as it remained in a long-term bear channel. Trade talks are front and centre with much speculation about what is on and off the table between the US and Japan – for example, currency deals and oil deals. The BoJ rate decision will be quiet with rates staying unchanged at 0.5%.
AUD rose and closed just above resistance around 0.6427, with the 200-day SMA above at 0.6465, ahead of CPI data released on Wednesday. CAD was flat on the day as it consolidated near recent long-term lows above 1.38.
US stocks: The S&P 500 gained 0.06% to settle at 5,528. The tech-dominated Nasdaq finished off 0.03% at 19,427. The Dow closed 0.28% higher at 40,227. Defensives turned the tables modestly on cyclicals as the Dow outperformed the Nasdaq and also the broader benchmark index. Last week had seen cyclicals massively outdo defensives on a global level. The tech megcaps are in focus this week with four of them (Apple, Amazon, Meta and Microsoft) all reporting either on Wednesday or Thursday after the US closing bell. These four tech giants make up nearly a quarter of the S&P 500 so will have a huge influence on the sector and the broader market. Tesla hits its 200-day SMA at $291.45 and held onto its near 10% gain from Friday on new self-driving regulations. Alphabet gave back some of its 1.5% gains from Friday after its decent results released late Thursday.
Asian stocks: Futures are mixed. APAC stocks were ultimately mixed to kick off a very busy week full of data, megacap tech earnings and trade news. The ASX 200 moved higher due to strength in tech and energy, with miners lagged. The Nikkei 225 was buoyed by a Toyota takeover proposal which saw the stocks jump double-digits. The Hang Seng and Shanghai Comp underperformed as government measures to support employment and stable growth disappointed.
Gold found support around $3260/8 again and finished higher on the day. Treasury yields were lower, so too the dollar, helping bugs.
Chart of the Day – USD/CAD holds near lows
Focus for CAD traders has moved in very recent days to the domestic election as the race appeared to have tightened. Polling showed the Liberals’ lead over the Conservatives narrowing to just two points. The outcome was unlikely to initially move the loonie materially, due to markets assuming a majority win for either party. But the biggest risk now is perhaps a narrow minority government. That could lead to the perception that Canada’s negotiating leverage with the US over trade is somewhat compromised. USD/CAD has fallen sharply this month though CAD does lag most of its peers. The recent low is 1.3780 with a support zone just above here. There’s a minor Fib level of the September to February rally at 1.3713. Resistance is 1.3944.
