Daily Currency Update

USD - US Dollar

The US dollar is experiencing a general decline in trading and is likely to close the week on a weak note. This could mark the end of a period of consolidation for the currency and signal a broader downward trend according to technicals. Market focus is on US interest rate policies and short-term yields, which have seen a slight increase today. While the USD is expected to remain weak in the short term and attract selling interest, it is unclear if the decline will continue significantly. This week’s ADP report showed a strong gain in private sector jobs, raising expectations for the NFP report today. The consensus call is for 185k jobs, although some late entries in the Bloomberg survey are predicting 200k or more. The overall trend in the US labor market appears to be slowing, but it may take a significantly lower result (100k or less) to cause a major impact on the USD's value today.

CAD - Canadian Dollar

Ahead of this morning's job data, the Canadian dollar is making slight gains against a weaker US dollar. The employment data for April is expected to show a gain of 20k, which is significantly lower than the 12-month average of 35k. Although the labor market remains tight, there are concerns that wage growth may be slowing down. Governor Macklem's recent comments on inflation highlight the challenges that lie ahead in achieving price stability, and although he expressed optimism, the possibility of higher rates cannot be ruled out. Market analysts are currently factoring in the risk of slightly more than one 25 basis point rate cut by the end of the year. Observe the USD/CAD trends.

EUR - Euro

Yesterday, the European Central Bank (ECB) reported that rate hawks abandoned their push for a more aggressive tightening move. This may be due to the clear signals from the policy statement and President Lagarde that there would be more hikes (at least two) in the coming months. Lagarde skillfully balanced hawkish messaging to keep the euro supported while also maintaining enough flexibility in policy setting. As a result, the euro is expected to remain well-supported, even on minor dips, at least in the short term.

GBP - British Pound

The British pound is performing moderately well today, with a 0.3% gain against the weaker US dollar. This has resulted in a new cycle high for GBP/USD and the strongest close in a year. Despite early indications of significant losses for the Conservative party in the UK local elections held yesterday, investors appear to be largely unfazed. With around 8,000 local council seats up for grabs, the results so far suggest that the party may lose nearly a thousand of them, which was considered a "worst-case" scenario prior to the vote.