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Currencies Stabilise as Inflation Data Looms

Foreign exchange markets are holding steady this morning as traders take cover ahead of a series of critical inflation reports that could determine the outlook for rate cuts from the Federal Reserve this year. The dollar is little changed against its major rivals, Treasury yields are moving sideways, and North American equity futures are pointing to incremental gains at the open. Today’s Survey of Consumer Expectations from the New York Fed is likely to echo Friday’s equivalent from the University of Michigan, with inflation expectations rising toward a six-month high. Household views on inflation tend to follow changes in gas...

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US Exceptionalism Fades, Weighing On Greenback

The “US exceptionalism” trade took another blow yesterday morning when the Bureau of Labor Statistics said the number of Americans filing initial applications for unemployment benefits rose last week to an eight-month high. The jump in jobless claims – up 22,000 to a seasonally-adjusted 231,000 in the week ended May 4 – surprised economists and helped bolster expectations for rate cuts from the Federal Reserve, helping erode the dollar’s yield premium and lift other currencies in relative terms. Softness in the labour market dovetails with our belief that re-acceleration hopes for the economy have become overblown, and we think that...

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AUD bounces back

• Softer USD. A surprise jump in US weekly jobless claims exerted some pressure on the USD. Positive risk sentiment helped the AUD.• BoE signals. BoE further opened the door to a rate cut. European central banks are leading the pack in the next global easing cycle.• Divergence. Policy divergence between the RBA & others should be AUD supportive. As should the pick up in growth in China. A more upbeat tone across risk assets overnight with the major European and US stockmarkets rising ~0.3-0.5%, oil (WTI crude +0.7%) and copper (+1.3%) firmer, and the USD losing some ground. The...

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Trading Ranges Shrink As Information Flow Slows

Risk appetite looks subdued across most asset classes this morning as the data cadence slows and investors keep a wary eye on funding strains in US government debt markets. Equity futures are edging lower ahead of the North American open, yields are holding gains achieved when the US Treasury’s latest 10-year auction met with weak demand in yesterday’s session, and the dollar is advancing against its major rivals. The Treasury is set to sell another $25 billion in 30-year bonds this afternoon. As expected, the Bank of England left its major policy settings unchanged and set the stage for a...

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European central banks leading the way?

• Quiet markets. US equities consolidated, while 10yr yields ticked up. USD a touch firmer. AUD’s post RBA pull-back extended a bit further.• European divergence. Sweden’s Riksbank cut rates. This follows the Swiss National Bank. Will the ECB be next? BoE tonight. It may be more ‘dovish’.• Global activity. China trade data due today. Various leading indicators for global industrial activity, like the copper price, have been improving. Fairly narrow ranges in global markets overnight with limited new information coming through to shake things up. US equities consolidated with the S&P500 ending the day unchanged after moving higher over the...

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