North American Summary and Highlights 8 May
Overview - The USD advanced on optimism on trade. A deal with the UK helped, but the main impetus was Trump comments raising hopes for progress in weekend talks with China.
North American session
The GBP saw a brief dip on a 25bps BoE easing, but with the BoE proving less dovish than expected the GBP quickly more than fully erased its dip. EUR/GBP, after a brief bounce above .85, saw a sustained dip to .8470. GBP/USD however, after rising to 1.3340, saw a marginal fresh low for the day below 1.3240 as the USD saw broad based gains.USD strength was led by optimism on trade. The deal with the UK provided some support, but details showed only moderate benefits for each side with 10% US tariffs still mostly intact. The main boost came from comments from
Trump suggesting that tariffs on China could be reduced if weekend talks went well, while he also recommended buying equities, which the market duly did. USD/JPY rallied to touch 146 from near 144.50, while EUR/USD fell to 1.1225 from above 1.13. USD/CAD rallied to 1.3925 from 1.3875 despite BoC Governor Macklem stating the tariff threat had eased somewhat, while AUD/USD saw lows below .64.
European morning session
USD/JPY gained nearly a big figure to near 145 in the European morning as equity markets continued to advance. The USD also gained elsewhere, but to a lesser extent, with EUR/USD losing 15 pips to 1.1285, GBP/USD down 45 pips to 1.3275, AUD/USD down 30 pips to 0.6410, and USD/CAD up 45 pips to 1.3885.
The Riksbank and Norges Bank left their policy rates unchanged as generally expected. EUR/SEK rose modestly to 10.92, while EUR/NOK was unchanged on the session at 11.70. German industrial production was much stronger than expected in March, rising 3.0% m/m, but this had no FX impact.
Gains in equities were related to Trump’s claim of a “major” trade deal to be announced later in the day, subsequently confirmed to be a deal with the UK.