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Most European markets were closed for the holiday, but that didn’t stop major currencies from chalking up major moves during top-tier releases!

The spotlight was mostly on the Bank of England’s monetary policy statement, as they decided to maintain rates at 5.25% as expected but still had some surprises up their sleeves.

Read on to find out what went down (or up!) in the financial markets.

Headlines:

  • Japanese average cash earnings for March: 0.6% y/y (1.5% expected, 1.6% previous)
  • BOJ meeting minutes seemed surprisingly hawkish as members called for rate hikes to contain potentially stronger inflation due to the weakening yen
  • Chinese trade balance for April: $72.4 billion surplus ($81.4B surplus expected, $58.6B surplus previous) as exports returned to growth while imports beat forecasts
  • BOE kept interest rates unchanged at 5.25% as expected in 7-2 vote (9-0 vote expected, 8-1 previous)
  • In his presser, BOE Governor Bailey said the central bank may cut rates and ease monetary policies “possibly more so than currently priced into market rates”
  • U.S. initial jobless claims: 231K (212K expected, 209K previous)
  • BOC Governor Macklem on Financial Stability Report: Higher rates will continue to restrain household spending
  • BOE MPC member Pill: Increased confidence in beginning to ease policy but time to act is not yet now, dependent on data and absence of economic disruptions
  • ECB official deGuindos: Future landscape of inflation is likely to be shaped by the slowdown in globalization,  leading to potentially higher inflation rates than previously experienced
  • FOMC member Daly: Past three months have injected considerable uncertainty about the inflation outlook for the upcoming months, sees a robust labor market coupled with persistently high inflation
  • New Zealand BusinessNZ manufacturing index in April: 48.9 (46.8 previous)
  • Japanese household spending in March: -1.2% y/y (-2.3% expected, -0.5% previous)

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

Markets were in chill mode early in the day, as the market holiday in Europe kept liquidity thin. Asset classes still seemed to be reacting to their individual catalysts, as crude oil tossed and turned while the S&P 500 index, bitcoin, and gold cruised higher as the U.S. session rolled along.

On the flip side, U.S. bond yields and the dollar took hits upon seeing surprisingly weaker than expected U.S. initial jobless claims data. First-time weekly claimants came in at 231K, higher than the consensus at 212K and the previous reading of 209K.

FX Market Behavior: U.S. Dollar vs. Majors

Overlay of USD vs. Major Currencies Chart by TradingView

Overlay of USD vs. Major Currencies Chart by TradingView

The Greenback was off to a generally positive start, as it cruised slowly higher despite thin liquidity conditions during Europe’s Ascension Day holiday.

A bit of profit-taking came in play for GBP/USD leading up to the BOE decision, MPC minutes, and quarterly Monetary Policy Report, before the U.K. currency tumbled sharply on a more dovish than expected announcement.

The spotlight soon turned to a disappointing U.S. initial jobless claims figure, which triggered a steep fall for the dollar against its rivals. The downward trajectory continued for the rest of the session, with the U.S. currency chalking up its most significant losses to the Aussie and Kiwi.

Upcoming Potential Catalysts on the Economic Calendar:

A couple of top-tier market catalysts are still on the docket before the week comes to a close, as Canada will be printing its April employment report while the U.S. will release its preliminary UoM consumer sentiment index for the same month.

Make sure you stay on your toes for potential volatility for USD and CAD pairs, as well as major swings in market sentiment!

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