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It’s the May Day holiday in much of the world today and it’s generally a great month for workers getting in paid in US dollars. May tends to be strong for the dollar.

• Strongest month of the year for the Dollar Index
• Weakest month for EUR/USD
• Second-worst month for AUD/USD and AUD/JPY
• AUD/CAD is particularly weak, softest month by far
• Second-strongest month for copper
• Strongest month for oil, though certainly skewed by the massive percentage gain (+88%) in May 2020 (note the reversal higher today). It also tends to be a very volatile month for oil
• The first week of May is generally the strongest for stocks while the second week is the weakest
• Middling month for stock markets overall

The main pattern is US dollar strength and the turn of the calendar comes after a four-month swoon in the Dollar Index. Even a small relative bounce here would be a decent monthly gain.

For those itching to sell the US dollar, the pattern for the Dollar Index dims in June and July so a strong bounce could be a spot to sell.

This article was written by Adam Button at www.forexlive.com.

A new report says that Europe is arguing that when services are considered that the trade deficit with the US is only €50 billion and they could bridge that by purchasing more natural gas and agricultural products.

Sefkovic indicated the EU would not accept a deal that kept tariffs at 10%, which is a critical point.

We are waiting on US deals to see if 10% is the floor, or if Trump is going to try and use tariffs to raise revenue. My guess is that Congress won’t tolerate 10% and that many partners won’t either but Trump does love tariffs so we’ll see.

Hassett said earlier today that a deal announcement is coming, which I expect to be with India. Will the floor go below 10%?

This article was written by Adam Button at www.forexlive.com.

Trump on Truth Social:

ALERT: All purchases of Iranian Oil, or Petrochemical products, must
stop, NOW! Any Country or person who buys ANY AMOUNT of OIL or
PETROCHEMICALS from Iran will be subject to, immediately, Secondary
Sanctions. They will not be allowed to do business with the United
States of America in any way, shape, or form. Thank you for your
attention to this matter, PRESIDENT DONALD J. TRUMP

The US has been sanctioning buyers of Iran’s oil for awhile but it mostly goes to China and it’s not like they could be tariffed any more than they already are.

The bigger question around Iran are the ongoing nuclear talks. If those fall apart there could be real repercussions in the oil market.

An even bigger development would be if US Congress were to put secondary sanctions on Russian oil.

This article was written by Adam Button at www.forexlive.com.

• Consensus estimate +130K
• Estimate range +25K to +195K
• March was +228K
• Private consensus +125K versus +209K prior
• Unemployment rate consensus estimate 4.1519%
• Prior unrounded unemployment rate 4.1396%
• Prior participation rate 62.5%
• Prior underemployment U6 7.9%
• Avg hourly earnings y/y exp +3.9% versus +3.8% prior
• Avg hourly earnings m/m exp +0.3% versus +0.3% prior
• Avg weekly hours exp 34.2 versus 34.2 prior

Numbers released so far this month:

• ADP report +62K versus +147K prior (lowest in almost 2 years)
• ISM services employment not yet released
• ISM manufacturing employment 46.5 vs 44.7 prior
• Challenger job cuts 105.44k vs 275.2k prior
• Philly employment +0.2 vs +19.7 prior
• Empire employment -2.6 vs -4.1 prior
• Initial jobless claims survey week 216K vs 225K prior

Seasonals from BMO:

• In April, the headline beat 57% of the time and missed 43% of the time
• On unemployment, the rate has been lower than expected 42% of the time, higher 39% of the time and in line 19% of the time

ADP looms large ahead of the report and the recent JOLTS number was soft but the initial jobless claims numbers lately haven’t shown any sign of layoffs, including today’s number which was skewed by New York teachers.

I’d note that the recent US dollar outperformance is based on the idea that tariffs won’t hit as hard and the Fed won’t need to rush into cuts. That’s a dangerous assumption ahead of a jobs report.

This article was written by Adam Button at www.forexlive.com.

• We expect to see GDP revised.
• GDP decline may have been due to inventory stocking of imports.
• US households consumption is strong.
• 2 year yields below Federal Funds Rate is signal that the Fed should cut rates.
• Our policies will bring down inflation.

The bolded comment is a classic “rule of thumb” in the markets. When the 2 year yield falls below the FFR, it’s a signal that the market views the tightening cycle over and expects the Fed to cut rates soon.

The problem here is that it’s based on markets expectations and they can be wrong at times. We saw that in 2023 when the 2 year yield has been below the FFR for a long time but then went all the way back to match the FFR.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Bank of America highlights that EUR positioning is broadly long, but notes Real Money investors are still underexposed, leaving room for further upside—particularly as equity flows and FX hedge adjustments shift in the euro’s favor.

Key Points:

• EUR Positioning:

  • Markets are net long EUR, but Real Money investors (e.g., pensions, insurers, asset managers) still have EUR allocations below the post-2012 median.

  • EUR is overbought versus CHF, NZD, and CAD, but USD positioning is only mildly short, suggesting room for further USD downside if sentiment worsens.

• Structural Tailwinds for EUR:

  • Equity rotation into Europe continues, with passive ETF flows playing a significant role.

  • European asset managers may begin raising hedge ratios on their US equity holdings—reversing a long-standing trend—which could translate into fresh EUR buying.

Conclusion:

While EUR positioning has grown more crowded in recent weeks, Real Money investors remain underweight, creating scope for additional EUR strength—especially if equity allocation trends and FX hedging flows materialize. The EUR remains supported by broadening diversification away from US assets and the relative attractiveness of European markets.

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This article was written by Adam Button at www.forexlive.com.

Pres. Trump says that anyone who takes oil from Iran cannot do business with the US. Oil has ticked up on the headline but is still down modestly on the day. The current prices trading at $58.11 that’s down around $0.06 on the day.

The high price reached $59.01 the low price was down at $56.42. The low price for the month of April intraday reached $55.15. But the low close from April 8 was $58.15. Yesterday the price closed just above that of $58.17 the low price in April reached the lowest level going back to February 2021.

This article was written by Greg Michalowski at www.forexlive.com.

Pres. Trump is speaking and says:

• He just received an update from congressional leaders on the tax bill
• Things are moving right on schedule

This article was written by Greg Michalowski at www.forexlive.com.

It’s an impressive day for the US dollar as the Dollar Index breaks above 100 with a broad bid. The chart here looks like something of an inverted head-and-shoulders pattern that targets a rise to 102.00.

The market is beginning to shift away from recessionary pricing and Fed cuts. A June cut is still high at 66% but that’s slide today while pricing for the year ahead is down to 122 bps from 131 bps yesterday.

The yield curve is validating the move as well with 2-year yields up 5 bps to 3.67% from a low of 3.56% earlier today.

The dollar bids are getting help from the tech trade as money piles back into the Nasdaq following strong earnings from Microsoft and Facebook.

There is a delicate balancing act here because tariffs are still out there and the US and China are effectively embargoing each other. The market is pricing in a trade war climb down but to what level? And no one really knows the effects on the real economy. That said, you could argue that companies like MSFT and META are basically immune.

This article was written by Adam Button at www.forexlive.com.

‘Buy America’ is the theme as the market anticipates some kind of trade deal to be announced later today.

That’s led to strong US dollar bids across the board that have accelerated in the last hour. In addition, stock markets are at the highs of the day with the S&P 500 up 1.4% and the Nasdaq up 2.4%. After falling into negative territory pre-market, the Russell 2000 is up 1%.

Aside from trade, one thing that could be driving bids is the tone from Congress around the big tax cut message. It’s tough to trust a politician but all the comments have been positive and upbeat. I think the flipside is that it will come with a huge budget deficit because that seems to be the path of least resistance.

So it’s not truly a ‘Buy America’ theme as bonds are selling off today. Bessent earlier highlighted falling 2-year yields but those have reversed course and are now up 3 bps and up 10 bps from the lows. We’ve also seen Fed cut pricing in the year ahead come in by 6 bps.

This article was written by Adam Button at www.forexlive.com.

The first report about Waltz came out a few hours ago and now CBS is reporting that he’s out along with deputy Alex Wong.

The initial report says US Special Envoy to the Middle East could be Steve Witkoff who has been negotiating with Russia and Iran. The again, there was a hit on Witkoff just yesterday in the New York Post.

It’s expected to be announced on the weekend but that timeline could change.

The move could also help to explain why US-Iran negotiations scheduled for this weekend were delayed. Waltz retired from the army reserve stepped down from Congress in January to take the job. He replaced Jake Sullivan who was Biden’s National Security Advisor for his entire term.

Trump had 8 advisors in the role in his first term, starting with Michael Flynn.

This article was written by Adam Button at www.forexlive.com.

• All three documents were signed
• General partnership overseeing the group located in Delaware
• 50% of royalties will come from new natural resource projects in Ukraine
• Ukraine deal can be a model for similar international deals

It doesn’t sound like they’re anticipating any problems with Ukraine’s parliament.

This article was written by Adam Button at www.forexlive.com.