The US Dollar Index remains near 100.50 after peaking earlier in the day. In the absence of major economic data, attention is focused on central banker comments, with Statistics Canada releasing April employment data later.

The USD has shown varied performance against major currencies this week, being strongest against the Canadian Dollar. On Thursday, a hawkish Federal Reserve and a UK-US trade announcement boosted the USD. Friday saw continued strength with the USD Index nearing its highest level since April 11.

China reported a trade surplus decrease in April, with exports up 9.3% yearly, while imports fell 0.2%. AUD/USD trades slightly higher above 0.6400. The Bank of England cut its policy rate to 4.25% and maintained a gradual monetary approach. GBP/USD has been declining, trading just above 1.3250 early Friday.

Maintaining Bullish Momentum

USD/JPY maintains bullish momentum, holding above 145.00 after a 1% rise on Thursday. EUR/USD, which fell below 1.1200 earlier, is rebounding near 1.1250. Gold, after Thursday’s decline, is rising again, trading near $3,330. Central banks play a key role in economic stability, navigating inflation through policy rate adjustments.

We’ve seen the Dollar hold firm, sitting close to 100.50 on the index after brushing higher levels earlier in the session. The lack of headline economic releases hasn’t curbed movement—far from it. Markets are tuned into what policymakers are saying, and it’s the tone, not the data, that’s steering expectations for now. With employment figures from Canada due out soon, traders are watching the Canadian Dollar’s recent slide with some concern.

Looking at the broader currency pairs, there’s been noticeable divergence in performance this week. Strength in the Dollar was especially apparent against the Loonie, suggesting anticipation around policy divergence may be gripping traders. Thursday’s upbeat tone from the Fed, described by Powell as firmly against rate cuts for now, gave Dollar bulls more reason to reengage. Momentum carried into Friday, pushing the Dollar Index to levels last seen in mid-April—undeniably robust.

On the other side of the Pacific, China’s April trade report landed with weaker import figures, hinting at tepid domestic demand. Export growth was solid on paper, up over 9% year-on-year, but the shrinking surplus suggests global demand alone may not be enough to keep the engine turning at full speed. The Aussie Dollar held above 0.6400, but its inability to stretch further suggests uncertainty around commodity flow and regional growth sentiment.

In Europe, sterling weakened sharply after the central bank in London opted to lower its rate to 4.25%, a decision likely aimed at cushioning softer growth reads across the UK. The Pound dropped towards 1.3250 by early Friday, reacting not just to the rate change but the board’s language that favoured a slow and cautious approach moving forward. That didn’t sit well with anyone looking for conviction.

Embracing Market Fluctuations

Dollar-Yen traders, meanwhile, are embracing momentum. The pair remained firm above 145.00, following a strong push that saw gains of around 1% earlier. It reflects widening rate differentials more than anything else. There haven’t been new bond buying threats or FX comments out of Tokyo lately, so the absence of official pushback may be fuelling further speculative build-up.

As for the Euro, we watched it dip below 1.1200 during the week, only to find bids closer to mid-1.12s again. That bounce has less to do with Euro Area optimism and more with Dollar strength softening after Thursday’s high. Still, there’s little reason for long-term upside unless domestic inflation or wage data hints at tighter policy from Frankfurt.

Gold dipped on Thursday but found some buyers as risk appetite cooled and yields stabilised. Now back near $3,330, we’re conscious that any shift in central bank tone—whether dovish pivots or data reaction—can make hard assets like bullion attractive again. Inflation may not be racing ahead, but it’s far from dormant, which means we could see greater downside protection flows resume into metals should rate hike pauses become more mainstream across major economies.

Over the coming sessions, those of us pricing derivatives need to stay alert. Volatility could spike again if unexpected commentary arises or upcoming employment prints sway sentiment. Rate path expectations are in flux. That, more than technicals or short-term demand patterns, may determine direction.

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