The Australian dollar was the biggest loser of the day, with GBPAUD climbing 1% by close of play following a more dovish than expected RBA interest rate decision and meeting earlier in the day.
The dollar remained on the backfoot as 30-year treasury yields had another run at 5% in the afternoon. Canada’s CPI numbers came in lower than expected seeing markets ease the amount of rates for this year.
*Daily move - against G10 rates at 7:00 am, 21.05.25
** Indicative rates - interbank rates at 7:00 am, 21.05.25
USD and US equity futures are lower to start the morning after CNN reported that Israel is preparing to strike Iranian nuclear facilities. Oil, to no surprise, is higher and we are also seeing flows into recent safe havens such the Japanese yen, Swiss franc, the EUR and gold. It's also worth noting that 30-year US treasury yields are just above 5% again on concerns of US debt and deficits.
Also, this morning, markets have pared back rate cut bets by the Bank of England after inflation numbers came in higher than expected – one rate cut is fully priced-in, with a 50% chance of a second rate cut this year. GBPUSD hit a new 3-year high as a result.
No major data points today but G7 finance ministers and central bankers are to begin a two-day meeting in Canada today and we will be weary of any potential comments surrounding FX policy potentially opening up the possibility of further dollar weakness.
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