The action in the dollar is going to fall somewhere on the interesting—terrifying spectrum. *
From Marc Chandler at Bannockburn Global Forex:
Overview: There appear to be two-forces at work that has helped the US dollar recover. First, as the market continues to debate whether the reciprocal tariffs are a negotiating ploy and in this tug-of-war of sorts, President Trump's declaration that he is open to "phenomenal offers" plays into that view. Still, the fact that Israel got rid of all of its tariffs on the US and still was hit with a 17% levy is notable. Second, there may be some position-adjustment ahead of the US jobs report. So far, the weakness in the US labor market appears in the soft, survey data, not the hard data, like weekly initial jobless claims. The rise in continuing claims is consistent with slowing in employment. A few hours after the jobs report, Fed Chair Powell will speak about the economy. This could be another source of volatility. However, we suspect he will be reluctant to signal much concern about the volatility of the stock market, i.e., no resurrection of the simplistic--stock market falls sharply, and Fed will cut" so-called Fed put.....MUCH MORE
The US dollar is firmer against all the G10 currencies but the Swiss franc. German factory orders disappointed and BOJ Governor Ueda recognized the unsettled global environments. Emerging market currencies are mixed with Asia-Pacific outperforming central Europe. The PBOC set the dollar's reference rate at its highest for the year. Few equity markets have escaped the selling pressure and US index futures are off 0.5%-1.0%, which warns of the gap lower opening. Bonds are still the safe haven. European 10-year yields are off 6-10 bp, and the peripheral premiums are widening. The 10-year US Treasury yield is off eight basis points to about 3.95%. Gold, ironically, is trading more like a risk asset and is off 0.75% today, but above yesterday's low (~$3054). May WTI has extended yesterday's dramatic sell-off, spurred by OPEC+ decision to boost sales around three-times more than expected and broader growth concerns. The contract reached about $64.25, its lowest since last September.
USD: The dollar fell sharply and broadly yesterday. The Dollar Index dropped by almost 1.7%, its largest drop since November 2022. It fell from a high Wednesday near 104.30 to a low a near 101.25 but managed to settle above slightly102.00. The sell-off was so sharp that the Dollar Index spent most of the European and North American session below three standard deviations from the 20-day moving average (~112.20)....
*Related: "Has China Run Out of Dollars? (will Europe?)"
