Forex Market

A jump in US jobless claims sent the dollar lower across the board yesterday, confirming how FX markets have an extremely elevated sensitivity to data in this moment.

A 261k weekly jobless claims print, the highest since October 2021 appears to have been all it took to push U.S. markets higher on the day and rekindle the idea that the Federal Reserve would signal a pause when it meets next week.

USDJPY edged lower on Thursday, keeping negative momentum below the psychological mark of 140.00 after failing to break the 141.00 level several times over the past week. The overall outlook remains bullish but is weakening as the Relative Strength Index (RSI) momentum is approaching the border of negative territory and the stochastic oscillator is moving down.

The Bank of Canada unexpectedly raised the overnight rate by 25 basis points to 4.75% and indicated its commitment to continue implementing quantitative tightening (QT) to support the Canadian dollar.

EURUSD is currently trying to find support. Although the uptrend has been broken, it is expected to recover.

We see two key themes driving FX markets near term. The first is central banks continuing to battle inflation, yield curves staying inverted, and the dollar continuing to hold gains.

CNH faces short-term depreciation pressure based on fundamentals but will not decline significantly.

The global forex markets are in a state of relative tranquillity today, as the dust begins to settle following two central bank surprises.

We saw another cautious day for European markets yesterday with little in the way of overall direction, after China exports for May plunged by -7.5% raising concerns about the outlook for global demand, while the Bank of Canada followed the RBA in hiking interest rates by 25bps.

The dollar's renewed strength against most major currencies will not fade away anytime soon, according to FX strategists polled by Reuters, who said it would take rate cuts from the Federal Reserve to weaken the currency substantially.