28th May, 2025

USD/CAD was the standout mover overnight and starts the day over +0.5% higher.

This follows the latest from US President Trump who posted on Truth Social that the so-called Golden Dome project would cost Canada Usd 61bln "if they remain a separate, but unequal, Nation, but will cost ZERO DOLLARS if they become our cherished 51st State".

"They are considering the offer!" he claimed, reports BBC News.

NZD/USD is another pair in focus and tentatively bottoms at 0.5924 after what has been described as a hawkish cut from the RBNZ.

The Bank cut interest rates for a sixth straight meeting, lowering the OCR as expected by -25BPs to 3.25%, and signaled scope for further reductions to bolster an economic recovery.

Bbg reports the RBNZ's new forecasts indicate one more -25BPs move and the chance of another, with the average OCR falling to 2.92% by year-end and 2.85% in early 2026.Orr and co also cited US tariffs and increased policy uncertainty abroad as factors to work to moderate NZs economic recovery and reduce medium-term inflation pressures.

The USD is generally firmer and returns towards approximate mid-range despite reports yesterday emerging of LHS USD flows for MONTH-END coming.

A busy morning ahead.

At the top of the hour, Scandinavia leads with Norway and Swedish retail sales as well as trade and household lending from the latter.

These are followed by the likes of final French Q1 GDP (seen 0.1% q/q), consumer spending and PPI; German unemployment and ECB 1 and 3-years CPI expectations for April (2.8%, 2.5% forecasts).

Highlight of the US slate is Minutes from the May 7 FOMC verdict, which may show rising concern over inflation and unemployment risks and reflect the board's well-publicised wait-and-see approach.

Ahead, Williams said the Fed should focus on anchoring “the whole curve” to prevent inflation from becoming persistent.

Also overnight, ECB's Lane stated Eurozone inflation will be about 2% this year though the impact of US tariffs will determine policy. And, Nagel argued the ECB is close to hitting its 2% inflation goal, but elevated uncertainty makes it impossible to predict future rate moves and requires flexibility.

Meanwhile, the SNB's president Schlegel said he doesn’t need to react to every monthly inflation reading even if it turns out to be negative.

Elsewhere, Japan’s auction of 40-year government notes drew a higher yield than than expected at 3.135% vs 2.71% in March. The bid-to-cover ratio though fell to 2.214 from 2.92 last and a lowest ratio since July.

And, Bbg also reports the USD's extended slide has prompted the PBOC to change tack in managing the RMB as it pivots from support to guarding against the risk of a rapid appreciation. Bbg explains the Bank has set the CNY's daily fixing at a slightly weaker level than market forecasts and state-owned banks have been buying USD rather than selling in the onshore market to slow gains.

Finally, back to Trump who warned the US may target Moscow with more sanctions over its latest attacks against Ukraine. And, the US president said he’s working on taking Fannie Mae and Freddie Mac public while maintaining government guarantees and oversight.

All US stock futures are about flat at the time of writing.

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