May 16, 2025 (Baystreet.ca via COMTEX) --
- Tariff talks may include exchange rates.
- US Michigan Consumer Sentiment ahead.
- US dollar remains on the defensive aft soft data yesterday.
USDCAD: open 1.3962, overnight range 1.3935-1.3969, close 1.3960, WTI 61.60, Gold 3209.40
The Canadian dollar is directionless and stuck inside yesterday's range with direction determined by broad-US dollar moves vs the major currencies. However, the upside remains limited as long as the Canada/US tariff situation remains unresolved.
WTI oil prices traded in a 61.28-62.35 range and remain under pressure thanks to the latest US threat prevent chip sales to more Chinese companies.
Markets are paying close attention as U.S. officials appear to be weaving exchange rate dynamics into ongoing tariff negotiations. The chatter began after the Taiwan dollar surged on reports that a stronger TWD would help facilitate smoother trade talks with Washington. Momentum picked up when the Korean won rallied in response to admissions that FX matters were raised in bilateral discussions. Now Japan is joining the fray, with Finance Minister Katsunobu Kato confirming that currency policy will be on the table when he meets U.S. Treasury Secretary Scott Bessent at the G-7 summit in Kananaskis, Alberta. Traders are rightly wondering if this FX narrative is more than just smoke.
Asian equity indexes ended the session mixed, with Japan's Topix barely nudging higher, Australia's ASX 200 up 0.56%, while Hong Kong's Hang Seng slipped 0.46%. European markets are broadly higher, led by gains in France's CAC 40 index. U.S. S&P 500 futures are up 0.31%. The U.S. 10-year Treasury yield has eased to 4.40%, and gold is trading at 3174.28.
EURUSD traded in a 1.1182-1.1220 band, with prices hovering midrange in directionless action. Slightly better odds of a more dovish Fed tone, following disappointing inflation and PPI data earlier this week, are giving EURUSD a mild lift. However, any sustained rally is capped by expectations that the ECB will cut rates at least twice more before year-end.
GBPUSD ranged between 1.3285 and 1.3333 and is probing session lows following an uneventful overnight session. That said, losses may be shallow if renewed U.S. Dollar weakness emerges, particularly in light of the Trump administration's deficit-fueled fiscal package--described by the former president as a "big, beautiful" bill. Short-term technicals remain supportive while prices hold above 1.3270, which protects the broader uptrend from early January anchored at 1.3030.
USDJPY moved between 144.92 and 145.73, chopping lower during Asian trade as some investors sought refuge in the yen ahead of the weekend. The slide in the U.S. 10-year yield from 4.54% to 4.369% added to the downward pressure. Japan's economy also surprised to the downside, with Q1 GDP contracting 0.7% y/y, missing forecasts and underscoring the negative economic impact of potential Trump-era tariffs, which appear to have already cooled public spending and export demand.
AUDUSD traded in a 0.6395-0.6437 range and lacked conviction despite yesterday's upbeat employment report. Bullish momentum has faded amid persistent worries over trade tensions between the U.S. and China, especially after news surfaced that the U.S. is preparing to blacklist additional Chinese semiconductor firms.
The Michigan Consumer Sentiment survey is due with the headline number expected to rise to 5.34 from 52.2. In addition, housing starts, building permits and the export import price index are on tap.
COMTEX_465555450/2559/2025-05-16T11:58:07
