Topic: Weekly FX Report

Political risk premia in Europe fell slightly this week amid French election concerns, but implied volatility remains high. Lower yields and disinflation have propelled US equity benchmarks to record highs.

Macron’s snap election call, lower U.S inflation, and fewer Fed rate cuts sparked market volatility. U.S bond yields dropped, equities hit highs, and European markets fell. EUR/USD volatility surged, widening the French-German yield spread.

Equity benchmarks in the US and Europe hit record highs before the non-farm report. The surprising 272k job increase reversed US treasury yield declines and reduced rate cut expectations.

Europe faces a challenging week as rising US bond yields increase market volatility. The Stoxx 600 fell for a second week, pressured by these yields. Meanwhile, the EU must decide on imposing tariffs on Chinese electric vehicles, adding to geopolitical tensions.

The US dollar rebounded from six-week lows with strong economic data. The British pound rose after UK PM Rishi Sunak called a snap election. NZD/USD spiked briefly on RBNZ’s rate hike signal.

US consumer prices fell unexpectedly in April, while import prices surged by 0.9%. Retail sales and industrial production stagnated, signaling a slower Q2 start. German investor sentiment hit a high, and China’s recovery remains manufacturing-driven. The US dollar weakened despite hawkish Fed comments.