US FX WRAP: Dollar ends the final trading session of the week red as US/China trade talks await

Analysis details (20:31)

The Dollar saw weakness to end the week, putting a stop to its recent recovery and gains seen post-FOMC and amid trade optimism. There was no data out of the US to end the week, albeit a slew of Fed speakers who reiterated Powell’s tones in wake of the FOMC on Wednesday. The Fed folk noted policy is in a good place and the Fed needs to wait to see how tariffs impact the US economy. Ahead, pivotal US/China talks are over the weekend, and ahead of that, Trump touted a China tariff cut, whereby he posted on Truth Social, “80% Tariff on China seems right!.” DXY traded between 100.08-86.

G10 FX, ex-CAD, saw broad-based gains vs. the Dollar, albeit to varying degrees. GBP and JPY outperformed, while CHF saw the fewest gains. CAD slightly weakened, with USD/CAD trading in a tight range but hitting a high of 1.3944. Canada added more jobs than expected for April, but the unemployment rate surprisingly rose to 6.9% from 6.7%, with expectations of a rise to 6.8%. Elsewhere, newsflow to end the week was quite sparse, and currencies seemed to take profit off of the floundering Greenback. For the Pound, BoE dissenter Pill (voted for unchanged) said not seeing a dramatic shift in the UK economy after tariff announcements, and limited economic reaction to tariffs partly reflects expectations of loose BoE policy. Ahead, the Chief Economist said "careful" rate cuts should be understood to represent being alert to and agile to future economic changes. Cable hit a high of 1.3322 against an earlier trough of 1.3213

For the single-currency EUR, US-EU trade updates are lacking after the EU on Thursday proposed potential countermeasures on up to EUR 95bln of US imports in the event that negotiations fail. ECB speak proved non-incremental with Simkus noting ECB June projections may be a little bit worse and a cut next month is needed, whilst Rehn remarked disinflation is on track, and the growth outlook is weakening. EUR/USD traded between 1.1197-1292.

EMFX was mixed. COP, BRL, MXN strengthened, Yuan, CLP were flat, while TRY and ZAR weakened. EM-related headline drivers were light (ex-China), as aside from the aforementioned trade news, there was also data and PBoC’s Q1 monetary policy implementation report. Exports soared much more than expected, while imports only marginally declined, against a much deeper forecasted decline. In the report, it said it will continue moderately loose monetary policy, and it will suspend Treasury bond buying and selling in phases; will resume buying and selling depending on market supply and demand situations

09 May 2025 - 20:31- ForexUS Research- Source: Newsquawk