Dollar firm as markets await Trump's signature on the ceasefire
The dollar holds firm as ceasefire progress stalls, with markets focused on geopolitics and key US data releases for direction this week.
USD
The dollar closed a choppy week little changed, the DXY ending Friday at the bottom end of its recent range, just below 99, with rising ceasefire hopes ahead of the weekend prompting a last-minute bout of greenback downside. That said, this has once again failed to translate into concrete progress over the weekend, meaning that the buck opens June on the front foot, as markets await President Trump's sign-off on last week's 60-day ceasefire memorandum. ISM manufacturing headlines the docket today; JOLTS, ADP, and claims follow ahead of Friday's payrolls — the week's marquee event, as our Week Ahead flagged. After April's +115k and steady 4.3% unemployment, a soft print would test the market's tentative flirtation with hike pricing under newly installed Chair Warsh.
EUR
EURUSD spent Friday pinned in the mid-1.16s, unable to capitalise on tumbling oil with the dollar still in the driving seat. That is likely to remain the case in the week ahead, albeit domestically this week's focus is the euro area's May flash HICP, the final inflation read before the ECB delivers a rate decision on 11 June. Markets price roughly an 95% chance of a 25bp hike to 2.25%, a striking pivot from last year's cutting cycle, after a chorus of calls for tightening policy later this month. Yet with Brent down some 19% in May, and rising ceasefire hopes, that hawkish urgency may fade, meaning we continue to doubt the ECB chorus alone can lift the euro against a firmer dollar while the energy-import drag lingers. Final PMIs round out the docket, but Friday's US payrolls will ultimately set the cross's tone.
GBP
Sterling firmed modestly on Friday, but that move barely dented a monthly loss exceeding 1% that leaves cable among the G10 laggards. The pound remains hostage to familiar forces: an energy shock that keeps the UK's terms of trade unhelpful, recent data pointing to a cooling labour market and softer inflation, and the political overhang from Labour's local-election drubbing and lingering questions over Prime Minister Starmer. As we have reiterated, we doubt sterling can sustain rallies against this backdrop. The domestic calendar is sparse early in the week, leaving cable headline- and payrolls-led. For now, that means Middle East headlines, domestic political uncertainty, and Friday's jobs report dominate.
CAD
The loonie languished around 1.38 ahead of the weekend, after a bruising GDP report published on Friday. Canada's economy posted a surprise first-quarter contraction, meaning that the economy is now in a technical recession, compounding soft domestic inflation, which saw the Bank of Canada's preferred core gauges slip to five-year lows in April. Together they reinforce the sense that energy-driven inflation may prove temporary, seeing the odds of further BoC tightening pared. That is weighing on CAD even as May's oil slide strips away a key currency prop. As we have noted previously, the loonie is pulled two ways — crude support versus a firmer dollar and fragile risk tone, and the latter has held the upper hand at present. Canada's May Labour Force Survey lands Friday alongside US payrolls, a double-header likely to drive USDCAD into next week's events. We see risks as skewed unfavourably for the loonie, meaning another leg higher for USDCAD could be on the cards this week as well.