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CAD

Markets retreat as slowdown fears become more entrenched

Price action in financial markets is restrained and the dollar is inching higher against its risk-sensitive counterparts as investors monitor debt ceiling negotiations and take positions ahead of tomorrow’s inflation data. Yields are lower and equities are on the defensive after Chinese authorities said export shipments to the rest of the world shrank 6.4 percent in April, providing more evidence of a deepening global economic slowdown. The first Senior Loan Officer Opinion Survey released in the aftermath of Silicon Valley Bank’s collapse showed lending conditions continuing to tighten – but not at the pace economists had feared. 45 percent of banks raised...

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Chartbook: May 8

Exhibit 1 Speculators are doubling down on long-euro bets. Net Long (+) or Short (-) US Dollar Futures Position Held by Large Speculators, Billions US Dollars, As at May 2, 2023 Exhibit 2 Economic surprise indices are diverging again. Citigroup Economic Surprise Indices, % Exhibit 3 Regional banks are still under pressure. KBW Bank Index Exhibit 4 Credit creation is slowing. Net Percentage of Domestic Banks Tightening Standards for Commercial and Industrial Loans to Small, and Large and Middle-Market Firms Exhibit 5 But loan volumes haven’t crashed. 3-Month Net Change in Loans, All Commercial Banks, Billions USD Exhibit 6 And...

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Dollar weakens as markets brace for credit contraction

The dollar is weaker against all of its major counterparts – except the yen – this morning as investors await data that should confirm a sharp contraction in US credit growth after the failure of Silicon Valley Bank in early March. Two- and ten-year yields are holding steady, futures are pointing to a mixed open for North American equities, and commodity prices are creeping higher. The yen reversed a brief post-Golden Week rally in the overnight session after a record of the Bank of Japan’s latest meeting showed officials remaining committed to “large-scale easing”, with supply chain constraints easing, commodity prices coming...

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Dollar weakens after Fed and ECB decisions match market expectations

The dollar is retreating for a third session, with all of its major counterparts recording gains on a Federal Reserve-driven drop in Treasury yields.  Oil prices are recovering after experiencing something resembling a flash crash around the Asia open last night, with prices plunging more than 7 percent. The move, which seemed to lack a fundamental trigger, saw closely-correlated currencies like the Canadian dollar and Norwegian krone remain relatively unmoved, but left the West Texas and Brent benchmarks down roughly 15 percent year to date. The market has been hammered by a weakening demand outlook even as the OPEC+ group of...

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Hopes for Fed pause kick dollar lower

Equity futures are climbing, Treasury yields are coming down, and the dollar is pushing lower as investors position ahead of what many expect will become the Federal Reserve’s last rate hike in this tightening cycle. Risk appetite remains diminished after yesterday’s session brought a decline in job openings, a softening in durable goods orders, and evidence of worsening stress in the regional US banking sector – but expectations for more accommodative policy settings later this year are helping support narrowly-held gains across a number of asset classes.  Rowing against the overall dollar-negative tide, the Australian dollar is gradually giving back some...

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