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Credit Agricole sees the return of the “USD frown”—the relationship between USD and US equity/FI performance—driving near-term USD weakness. But they dismiss fears of a full-blown crisis akin to the UK’s “Truss moment,” citing continued global demand for Treasuries and the USD’s reserve status.

Key Points:

• USD Selling on Risk Aversion:Investors are selling USD as US equities weaken and Treasury yields rise, fearing capital outflows and fragility in US fixed income following Moody’s sovereign downgrade.

• Political and Policy Concerns:Stalled fiscal stimulus talks in Congress and Fed commentary on stagflation risks have amplified worries over the macro backdrop and reinforced the USD’s vulnerability to risk sentiment.

• But No ‘Truss Moment’:Credit Agricole does not expect a disorderly selloff in US debt akin to the UK gilt crisis under PM Liz Truss. They argue long-end yields may stabilize, especially given the USD and USTs remain global reserve anchors.

• Structural USD Support Intact:Despite near-term volatility, global demand for USD assets remains resilient, which should cap USD downside, especially against currencies from economies with weaker fundamentals or lower yields.

Conclusion:

While the USD is under pressure from equity and bond market jitters, Credit Agricole sees this as a tactical adjustment rather than a structural shift. The market is not pricing in a systemic credibility shock like the UK faced in 2022, and the USD’s reserve status should limit sustained underperformance.

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

• Oil rig count: -8 to 465 (4th straight weekly decline)
• Natural gas:-2 to 98
• Total rigs -10 to 566

Drill. Drill. Drill has not exactly been happening. Yet oil prices are still down on the year with the price down -14.51% or -$10.42 from the closing level at the end of 2024 ($71.81). The current price is at $61.39.

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

More from Treasury Secretary Bessent:

• US Sovereign Wealth Fund is on pause.

I may be wrong but the idea stemmed from the receipts from the External Revenue Service and perhaps from the savings from DOGE.

IN reality, if tariffs are too high, they won’t provide any revenue. Moreover, if the shakedown is to manufacture ALL goods in the US, there also are no tariffs.

DOGE fell well short of savings expected.

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

I have a close eye on USD/CAD today as the pair steadily slides as part of the broader US dollar selloff.

The loonie is so far underperforming the AUD and NZD today in percentage terms but it’s also brushing up against an important level. Moreover, the market may be hesitant to push though with US and UK holidays coming on Monday.

The key item on the agenda for the loonie in the week ahead is Thursday’s Canadian GDP report. RBC expects it will show the Canadian economy grew by 1.8% annualized
in Q1. The caveat is that the quarter was front-loaded with strength in January that gradually faded.

“We expect to see an increase in household consumption
in Q1 that was partially offset by a contraction in residential investment as
home resales cooled. Business investment likely inched higher, but is expected
to soften in the coming quarters as businesses freeze spending plans amid
disruptive trade policies,” RBC writes.

My major worry about Canada relates to housing, which continues to crack. Listings are mounting quickly in the Toronto area and with 5-year rates rising, there is little hope for relief any time soon. The Bank of Canada is now less-likely to cut rates in June and the rising loonie will help to cool inflation.

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

• Expect we will be negotiating with China in person again
• There is a Laffer Curve for tariffs
• A lot of these non-tariff barriers are coming down
• We don’t know where
• Sees ‘several hundred billion’ per year in tariff revenue

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

USD/CAD is flirting with a break of the lows of the year.

The US dollar is sliding broadly today but the Canadian dollar is getting an extra lift from March and April retail sales data. The numbers were solid and come on the heels of a hotter CPI.

Combined, that has the odds of a June 4 rate cut down to 28% from 65% before CPI.

Economists at CIBC were one group calling for cuts and now sound like they’re just waiting for next week’s GDP report to flip.

Our forecast for a contraction in GDP in April and Q2 as a whole is driven more by expected
weakness in manufacturing and other sectors more directly impacted by US trade. Advance figures for those areas are
due to be released early next week, but if they also aren’t as weak as anticipated then we will have to revise our forecast
for monthly GDP and likely our Bank of Canada rate cut call as well.

As for the report itself, they note that consumer spending has been holding up better than anticipated. The caveat is that auto sales were a big driver of stronger retail sales and that could have been a tariff front-run trade.

Watch for stops below the May low of 1.3748.

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

• Prior was 724K (revised to 670K)
• Sales monthly change 10.9% vs +7.4% prior (revised to +2.6%)

Rising long-term yields and borrowing costs aren’t helping the housing market. Shares of home builders have struggled badly this year.

This is a surprising number but it looks like some sales have simply been shifted by a month as the March number was revised far lower.

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

I don’t think there is any secret on what’s happening between the US and EU at the moment; Bessent spelled it out. He said the EU has been moving too slowly on trade and Trump wants to ‘light a fire’ under the EU.

The message was strategically timed ahead of a call today that was scheduled previously. At 12:30 pm ET, there is a call scheduled between EU trade boss Sefcovic and USA counterpart Greer will take place.

The market will be waiting for a read-out (or leak) from that call afterwards.

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

If you missed it, Trump earlier ‘recommended’ a 50% tariff on the EU starting June 1.

• Trump believes EU proposals have not been of good quality
• Would like to have Apple help US to make semiconductor supply chain better
• Trump trying to bring back precision manufacturing to the US
• Says US is ‘far along’ with India and Asian countries
• Most countries negotiating in good faith except EU
• These deals are moving quickly
• We will see more deals announced in 90-day period

Separate comments are coming from the German foreign minister:

• We support Commission to defend the European market
• Both markets would suffer, that’s why we want further negotiations

In hindsight, we should have been bracing for something. Trump took a break from the trade war to go to the Middle East and wouldn’t have wanted to announce something like this during the G7 on Wed/Thurs.

Notably, Trump will attend the G7 in Canada from June 15-17, so if he follows the pattern of lowering tensions during international visits, that leaves a three-week window.

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

S&P 500 futures are down 1.5% shortly before the open while Nasdaq futures are down 1.8% as Apple falls 3.5% on Trump tariff threats on iPhones.

It’s a long weekend in the US so trade could taper off into the weekend but a big question will be: When to buy the dip? The lesson of the China trade war round is that Trump doesn’t have the appetite to really hurt the stock market, so the trade is to buy the dip. The question is: when?

That’s a much tougher one to answer. We’re at the end of another week and there haven’t been any trade deals this week, despite Hassett saying they were coming again. The July 9 deadline for tariffs is fast approaching.

For me, there is no edge in guessing at the timing of when to buy. At best, you can buy it when Trump tells you to.

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

The knee-jerk reaction to Trump threatening tariffs on the EU was to buy the US dollar on a number of fronts but that’s quickly faded. Cable is now trading near the highs, AUD has bounced all the way back and the loonie is at its best levels.

Even the euro — which is the target of the tariffs — has rebounded 35 pips and is still up a half-cent on the day.

The trend so far this year has been to sell the US dollar as the US breaks the global consensus on trade. That should be the result of this round of tariffs as well.

Naturally, some people will be looking to buy the dip but that’s tough to time. It’s certainly early at the moment but if you believe Trump will ultimately back down then it’s never too early. He left himself an out by waiting until June 1 and it’s notable that there is a call scheduled today.

The EU doesn’t have the backbone for a fight in the way that China does so this could go badly for them if they roll over. That said, it’s tough with so many voices in Europe. If they do fight, it could embolden the Chinese, Japanese and others as well.

Again, these are all risks for the US economy and US dollar. I don’t see how the Fed gets any closer to cutting rates now and I don’t see how US businesses will be more-willing to invest or hire in light of this development.

So far, the clearest trades are buying the yen, Swiss franc and gold.

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

• The advanced March report was +0.7%
• Prior was -0.4% (revised to -0.5%)
• Ex-autos -0.7% vs 0.0% expected
• Prior ex-autos +0.5% (revised to +0.6%)
• Advance April report +0.5%

The RBC survey on Canadian consumers last week hinted at a resilient consumer in April and that’s what the advance number shows. On the flipside, that core number in March is poor.

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