Dollar Pushes Higher As Canadian Elections Kick Off
GBP
GBP/USD is currently trading at 1.3361 (interbank), while GBP/EUR has strengthened to 1.1762 (interbank).
The Pound has continued its ascent despite firm expectations that the Bank of England (BoE) will lower interest rates by 25 basis points to 4.25% at its policy meeting on 8 May.
Last week, BoE Governor Andrew Bailey cautioned that escalating trade tensions pose a significant threat to UK growth, prompting a downward revision of forecasts to 1.1%, and he signalled that a US trade agreement would not be sufficient to shield the economy.
Chancellor Rachel Reeves reaffirmed that the UK is not rushing into an agreement with Washington, while the National Insurance hike in the Spring Budget continues to stir concerns that higher business costs could soon filter through to consumers.
With inflationary pressures persisting and wage growth remaining robust at 5.6%, the BoE is carefully assessing potential inflationary risks stemming from Trump’s tariff policies, although Bailey has reiterated that these factors will not deter plans for rate cuts.
This week, markets will watch for remarks tomorrow from Deputy Governor Woods and MPC member Ramsden.
No significant events are scheduled for today.
EUR
EUR/USD is currently trading at 1.1360 (interbank), consolidating beneath the 1.14 threshold after recent gains.
The euro found brief support last week following optimism over US-China trade relations, but this faded after Chinese authorities denied the existence of any current negotiations, reinforcing market caution.
This week’s focus will shift to eurozone GDP figures and Friday’s flash CPI release for April, with inflation expected to ease towards 2.1%, even as core CPI remains slightly elevated at 2.5%.
ECB President Christine Lagarde reiterated that the disinflation process is nearing completion, although the economic outlook has worsened in light of US tariffs, necessitating a more dovish monetary stance.
The ECB has already reduced rates seven times since June 2024, and analysts expect a final cut in June before maintaining a neutral policy stance through the remainder of the year.
Today’s Events (GMT+1):
14:00 - ECB's De Guindos Speaks
USD
The dollar index, which measures the currency against a basket of other major currencies is currently trading at 99.62, holding near a three-year low.
Doubts surrounding the Trump administration’s trade narrative intensified after Treasury Secretary Scott Bessent confirmed that recent communications with China were purely at the IMF level and not formal trade talks.
The US economy remains under close scrutiny this week with the release of first-quarter GDP and April’s non-farm payrolls report; tariffs are expected to exert an increasing drag on economic activity.
Economists forecast that 129,000 jobs were added in April, with the unemployment rate expected to remain steady at 4.2%, while GDP growth is projected to show a significant slowdown.
Uncertainty over tariffs, alongside weaker data, continues to fuel speculation over potential Federal Reserve rate cuts later this year.
No significant events are scheduled for today.
CAD
USD/CAD is currently trading at 1.3860 (interbank) in early trade.
The Canadian dollar remains resilient, supported by rising oil prices and pre-tariff consumer spending, although there are clear signs that momentum may soon wane.
Today’s federal election is front and centre, with Prime Minister Mark Carney expected to secure a narrow victory after an unexpectedly strong resurgence fuelled by nationalist sentiment against U.S. tariffs.
While Canada’s February retail sales declined by 0.4% on Friday, March’s figures showed a stronger 0.7% recovery, tempering concerns about consumer resilience.
The Bank of Canada is likely to continue monitoring incoming data closely, with further rate cuts remaining a possibility should the outlook deteriorate.
Oil prices are little changed this morning, with Brent crude holding at $66.80 per barrel and WTI at $63.01 per barrel, as markets await clarity on the global trade situation.
Today’s Events (GMT+1):
13:00 - Canadian Federal Election
13:30 - Wholesale Sales (Mar) – Actual: -0.3% vs Previous: 0.3%
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