North American Summary and Highlights 7 May

North American session

With no significant data markets were quiet ahead of the FOMC decision, though the USD did see some marginal gains, Treasury Secretary Bessent confirmed weekend talks with China.  

Shortly before the FOMC statement Trump stated he would not lower tariffs to jump-start talks with China and USD/JPY edged lower, a move that extended below 143 as the FOMC left policy unchanged but saw greater risk of both higher inflation and higher unemployment. EUR/USD similarly reversed pre-FOMC losses.  

However, the USD losses on the FOMC statement were modest, and more than fully reversed during Chairman Powell’s press conference in which he made it clear that the Fed was in no hurry to change rates given the ongoing uncertainty. USD/JPY bounced to test 144 while EUR/USD slipped to test 1.13 from 1.1365, though in neither case was a break seen. The USD also advanced versus the commodity currencies, USD/CAD rising to 1.3830 and AUD/USD falling to .6430.  

European morning session 

The USD made modest gains through the European morning, rising around 0.1% against the JPY, GBP, CAD and AUD, but was little changed against the EUR and CHF. EUR/SEK moved a couple of figures higher after Swedish provisional April CPI came in weaker than expected at 2.3% y/y for the targeted CPIF measure. Otherwise, the EUR found some support from the stronger than expected German factory orders data, which showed a 3.6% gain in March against a market consensus of 1.4%, but the data is volatile and the underlying trend remains flat at best.