Marc to Market

G10 Currency Consolidation Looks Constructive, but the Weekend Poses Risks

2026-04-10T06:49:00.003-04:00

The dollar is mixed against the G10 currencies today, ahead of the March US CPI report. The dollar bloc and the Japanese yen are struggling. However, the tone is mostly consolidative. Equities were higher in the Asia Pacific region, with a few exceptions, and in Europe. Bond yields are firmer. Both WTI and Brent crude oil are trading with a slightly firmer bias but well within this week’s ranges.

US and Iranian officials will meet in Pakistan tomorrow. The ceasefire apparently seen some violations and the Strait of Hormuz is not fully open as it was before the war. Yet market participants seem hopeful. At the same time, reports suggest Ukraine and Russia may be near a tentative agreement to stop hostilities. Meanwhile, reports suggest the Federal Reserve Powell and Treasury Secretary Bessent met with the large banks to discuss new risks generated by AI. Hungary goes to the polls this weekend and Prime Minister Orban is lagging in the polls. He is liked by the Trump administration (though its support may have cost him) and Russia and China. Still, the Hungarian forint is second strongest emerging market currency this week (~3.6%), lagging behind the Russian ruble’s 3.7% appreciation.

Prices

G10

• The euro traded in the upper end of Wednesday’s trading range yesterday and again stalled in front of $1.1725. It is consolidating mostly between $1.1680 and slightly above $1.1715 so far today. The price action looks constructive. The next technical target is $1.1745-50. It has a four-day advancing streak coming into today, which matches the longest of the year.

• The dollar traded firmly against the yen yesterday but could not resurface above JPY159.30. It has edged slightly higher today but is holding below JPY159.40. $780 mln of options at JPY159.50 expire today. The greenback settled slightly above JPY159.65 last week. If the dollar does not recover and settle above it today, it will be the first back-to-back losing weeks for the dollar since the end of January.

• Sterling consolidated in the upper end of Wednesday’s range yesterday. It hardly spent any time below Wednesday’s $1.3395 settlement. Sterling has held above $1.3400 today, where options for GBP355 mln expire today. On the other hand, it is holding below yesterday’s high (~$1.3460). Wednesday’s high was almost $1.3485, its best level since the war began.

• The Canadian dollar strengthened to its best level in a little more than two weeks yesterday. The greenback was sold to almost CAD1.3800. It frayed the 20- and 200-day moving averages (~CAD1.3815-20) on an intraday basis but settled above them. The US dollar is trading firmly and reached almost CAD1.3845 today. Options for nearly $600 mln at CAD!.3850 expire today.

• The Australian dollar reached a three-week high yesterday, a little shy of $.7100. At the end of March, it fell below $0.6840. The five-day moving average crossed above the 20-day moving average yesterday for the first time since mid-March. It is trading with a slightly softer bias today and is consolidating between about $0.7055 and $0.7085. A band of nearby resistance extends toward $0.7125.

• The Mexican peso extended its recovery and has recovered the lion’s share of last month’s losses. The US dollar finished February near MXN17.2270. Yesterday’s losses took the greenback a little through MXN17.3250. It is in roughly a MXN17.3450-MXN17.4045 range today. The dollar peaked on March 31 near MXN18.1650. It posted a key downside reversal that day and has not looked back.

• The dollar drew closer to the next important support area against the offshore yuan near CNH6.80 yesterday. It reached CNH6.8200 on Wednesday, a three-year low and consolidated above it yesterday. Since Wednesday’s low, the greenback has not been above CNH6.8420. Today, it has not been above CNH6.8345. The PBOC set the dollar’s reference rate at CNY6.8654 (CNY6.8649 yesterday, a three-year low). The low fix in 2023 was around CNY6.7130.

• It appears that the Indian currency controls introduced recently have run their course. The US dollar briefly traded to a marginal new low since March 18 today (~INR92.4115) but recovered to almost INR92.7665. Still, the rupee managed to hold on to a 0.40% increase for the week.

Other Markets

• Asia Pacific and European equities have traded firmer today. Most of the large bourses in the Asia Pacific region rose by at least 1% today, though Hong Kong’s Hang Seng was an exception (+0.55%) as was Australia (-0.15%) and New Zealand (-0.70%). Europe’s Stoxx 600 is up around 0.60% in late morning turnover. If the gains are maintained, it would be the second consecutive week that it rose more than 3%. US index futures are hovering around little changed levels. The S&P 500 is up about 3.6% this week and the Nasdaq is up about 4.3%.

• Benchmark 10-year yields have jumped today. Australia and Japan’s rates rose a little more than five basis points. European yields are 4-8 bp higher. The 10-year US Treasury yield is up almost two basis points to approach 4.30%. It is off a little more than three basis points on the week.

• Gold is trading slightly heavier today but within yesterday’s range (~$4699-$4801). Silver is consolidating between about $74.85 and $76.20. Both metals are up for the third consecutive week.

• May WTI is firm but quiet. It is near $99 in late European morning activity. It reached $102.70 yesterday and is holding below $100.50 today. The month’s low was recorded on Wednesday, near $91. Today’s low is near $97.60.

Data

• The reaction to the expected surge in the March US CPI will be tempered by the ceasefire. The median forecast in Bloomberg’s survey is for a 1% rise in CPI last month, which would lift the year-over-year pace to 3.4% from 2.4%. The core is seen rising by 0.3% for a 2.7% year-over-year increase. If the ceasefire holds and leads to an end to the conflict, there still may be some residual upward pressure on CPI in April. The ceasefire comes too late to lower inflation expectations in the preliminary April University of Michigan survey. The preliminary durable goods orders (-1.4% headline and +0.6% excluding defense and aircraft orders removes so interest from today’s factory goods orders and revision to the durable goods report. Lastly, the March federal budget deficit is due and the median forecast in Bloomberg’s survey is for a shortfall of about $152.5 bln. This compares to $160.5 bln deficit in March 2025 and $236.6 bln deficit in March 2024.

• After losing almost 84k jobs in February (-108.4k full-time positions were lost and part-time jobs rose by 24.5k), Canada is expected to report muted recovery with a gain of about 15k jobs overall. The participation rate may have ticked up to 65.0% from 64.9%, and this will likely be translated into a rise in the unemployment rate to 6.8% from 6.7%.

• Mexico reports February industrial production figures today. After falling 1.1% in January, it is expected to have recovered by about 0.6%. Still, the year-over-year pace of both industrial output and manufacturing production are still falling on a year-over-year basis (-1.0% and -1.8% respectively), which appears to be a greater concern to the central bank than inflation, which we learned yesterday, remained above the 2-4% target range last month.

• Japan reported a 0.8% jump in March producer prices. The February series was revised to 0.1% from -0.1%. Given the base effect, this increased the year-over-year rate more modestly to 2.6% from a revised 2.1% (initially 2.0%), which is the highest since last November. Separately, Japan reported a 28.1% year-over-year jump in machine tool orders (24.2% in February). Foreign orders surged 40.4%, while domestic orders rose 2.5%. The market has wavered a bit, but we continue to suspect that there is a better chance that the Bank of Japan lifts rates later this month than it standing pat.

• China reported PPI rose 0.5% in March, its first year-over-year increase since September 2022. Deflationary forces have been slackening since the middle of last year when PPI fell 3.6% year-over-year. Since then, with one exception, deflation in producer prices has moderated. The CPI is 1.0% higher than a year ago (1.3% in February). Previously, many observers had attributed the weakness in CPI to weak demand. We have been more skeptical. Consumption has risen in China, but investment has increased quicker, and food prices, for which demand is more inelastic, seemed to be a key factor. Consider that the slippage in March seemed to reflect the moderation in food price increases (0.3%) after 1.7% in February. Also, housing prices fell for the fourth consecutive month. Core CPI finished 2025 at 1.2% and rose to 1.8% in February. It moderated to 1.1% in March.

Disclaimer

Rough Start to Ceasefire Curbs Yesterday's Enthusiasm

2026-04-09T06:46:00.000-04:00

It seemed clear that yesterday’s euphoric reaction to the two-week ceasefire was exaggerated. Ceasefires often have been plagued with disputes and violations at the start. This one is no different. At the same time, Israel’s action in Lebanon complicates the situation and there is some dispute whether it was covered by the ceasefire. President Trump has suggested that perhaps the US participates in the toll collection for the Strait of Hormuz.

Equities have seen yesterday’s surge pared. Benchmark 10-year bond yields are mostly firmer. The greenback has been largely confined to narrow ranges against the G10 currencies. Most are a little firmer, but not the Australian and Canadian dollars and Japanese yen. The JP Morgan Emerging Market Currency Index is practically flat. Drawing very little attention, the PBOC set the dollar’s fix at a new three-year low for the third consecutive session.

Prices

G10

• The euro poked a little above $1.1720 in North America yesterday, a modest extension of the rally seen in the Asia Pacific session in response to the ceasefire. After the high was recorded, the euro slipped back to around $1.1645, which was below the low seen in Europe. It recovered and settled near $1.1665. It has been confined to about a 15-tick band around yesterday’s settlement.

• The dollar fell by about 0.55% against the yen yesterday. It traded below JPY158 for the first time in two weeks but recovered to settle about JPY158.55, which was a little above the high seen during the European session. It has hardly traded below there today and is straddling the JPY159 area in late European morning turnover. Options for about $670 mln at JPY159 expire today.

• Sterling dipped below $1.3180 at the start of the week, and at yesterday’s peak, it had risen by slightly more than three cents to its best level in a month. It briefly pushed above the upper Bollinger Band (~$1.3465 today) for the first time since late January. Sterling pulled back to a around $1.3380 in the North American afternoon and settled around $1. 3395. It is in a $1.3380-$1.3415 range today.

• The US dollar recorded the session low yesterday against the Canadian dollar in the Asia Pacific session near CAD1.3825. It recovered to CAD1.3875 late in the European morning and consolidated in quiet though choppy activity in North America. The greenback is trading quietly today between about CAD!.3840 and CAD1.3860. Options for about $360 mln at CAD1.3890 expire today. A break of the CAD1.3800 area could see CAD1.3750 next.

• The Australian dollar reached $0.7085 in the initial reaction to the ceasefire news and spent the rest of yesterday consolidating above $0.7030. It hovered around the $0.7050 area for most of the North American session. It has held above $0.7020 but below $0.7050, where options for a little more than A$1.35 bln expire today. It entered today’s with a three-day 2.3% advance in today.

• The Mexican peso rallied 1.5% yesterday. The greenback was sold to MXN17.36, its lowest level since March 3 and settled around MXN17.44. It had settled around MXN17.2270 before the war began. The dollar is trading quietly today and is little changed around MXN17.44-45 in late European morning turnover and has held below MXN17.50. The Mexican peso was stronger than the Colombian peso yesterday. But the greenback is weaker against the Colombian peso now than it was before the war started. The same is true of the Brazilian real. On February 27, the dollar settled near BRL5.1160, its lowest level since May 2024. Yesterday, the greenback gapped sharply lower and saw BRL5.0655. It closed near BRL5.0970 yesterday.

• The offshore yuan reached its best level since February 2023 yesterday. The dollar tested CNH6.82. It is consolidating in a narrow range today (~CNH6.8310-CNH6.8415). The low in 2023 was a little below CNH6.70. The PBOC set the dollar’s reference rate lower for the third consecutive session, and each one is a new low since April 2023. Today’s fix was set at CNY6.8649. Last Thursday, it was set at CNY6.8880.

• The dollar rose to INR92.9375 today, which filled the gap created by yesterday’s sharply lower opening. For the first time since the Middle East war began, the five-day moving average has crossed below the 20-day moving average. However, rather than signal a new downtrend, the crossing moving averages reflect the short squeeze that was triggered by the central bank’s currency restrictions on Indian banks.

Other Markets

• Equities are seeing yesterday’s sharp gains pared. Most of the equity markets in the Asia Pacific region fell, with the notable exceptions of the Antipodean and Taiwan’s markets. Europe’s Stoxx 600 rose almost 3.9% yesterday and has given back around 0.65% today. US indices rose 2.5%-2.8% yesterday and are off around 0.25%-0.35%

• Benchmark 10-year yields have recouped some of yesterday’s decline. The JGB yields edged up 1.5% bp, while Australia and New Zealand yields rose 5-7 bp. European benchmark yields are mostly 4-7 bp higher. The 10-year US Treasury yield is softer, slightly below 4.29%.

• Gold is firm near $4730 in Europe, and well off yesterday’s high (almost $4857). Silver is little changed as it hovers around $74.

• May WTI hit almost $91 yesterday and settled near $94.40. It is making session highs in late European morning turnover near $98.60. The 20-day moving average is around $99.25.

Data

• Usually, the US personal income, consumption data and the deflators would be the focus today. However, the February deflator readings are old as they cover the period before the Middle East war and the March CPI will be reported tomorrow. The optics of the consumption data will be better than the substance. Adjusting for inflation will keep real consumption expenditures hovering around the three-month average of 0.1%. The Atlanta Fed’s GDP tracker sese Q1 GDP at 1.3%. The median forecast in Bloomberg’s survey is more optimistic at 2.3%.

• Mexico reports March CPI today. It is likely to have accelerated further above the upper end of the 2-4% target range. The headline rate is seen rising to4.65% (from 4.02%) and the core rate may continue to hover near 4.50%. With inflation above target last month, the central bank not only cut rates but signaled it may do so again. Officials are clearly concerned about growth, and the record of last month’s meeting may offer insight into official thinking. Mexico will also report March vehicle production and exports. The data tends not to have much market impact, but it is noteworthy, that Mexico exports almost 80% of its output. Proportionately, that is around four times China vehicle exports.

• Germany reported February trade and industrial output figures earlier today. The trade surplus narrowed to 19.8 bln euros from 20.3 bln in January, but it stood at 17.7 bln in February 2025. Exports rose 3.6% on the month (-1.5% in January), while imports rose 4.7% (-5.1% in January). Industrial production fell by 0.3% in February, before the new energy shock. The median forecast in Bloomberg’s survey anticipated a 0.7% increase. Part of the sting was lessened by the upward revision in January’s reading from -0.5% to flat.

• China reports March PPI and CPI first thing tomorrow. The median forecast in Bloomberg’s survey is for PPI to have risen by 0.4% year-over-year. If so, that would be the first increase since September 2022. Consumer prices rose 1.3% year-over-year in February, the strongest since January 2023. It may have slowed slightly in March. Note that the core CPI, excluding food and energy, rose 1.8% in February, the strongest since early 2019.

Disclaimer