G10 FX trades risk off on prospect of US/Iran deal & lower Oil prices - Scotiabank

Risk aversion is dominating as we head into Thursday's NA session with a distribution of relative currency performance that is seeing notable strength from the havens Swiss Franc (CHF) and Japanese Yen (JPY) and weakness from the growth-sensitive commodity currencies NOK, NZD, and AUD. The Canadian Dollar (CAD) and Mexican Peso (MXN) are trading flat vs. the US Dollar (USD) and are mid-performers among the G10 as Euro (EUR) and Pound Sterling (GBP) show modest gains, Scotiabank's Chief FX Strategist Shaun Osborne notes, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD mixed as G10 offer clear risk off signals with stronger havens

"Market participants are digesting the prospect of a US/Iran deal, sending oil prices lower and delivering a wave of disinflation across global markets as traders consider the possibility of a repeat of 2015- 2018 period that saw Iranian exports surge by roughly 2 million barrels per day. US equity futures are trading defensively and looking somewhat exhausted following a spectacular rally from their early April lows."

"US yields are off on the day but remain in a solid uptrend as markets trade off of easing trade tensions, fading recession fears, and the US fiscal outlook. Copper prices continue to consolidate around the midpoint of their recent range and the price of gold is flat on the day, recovering from a short-lived drop below its 50 day MA."

"Thursday's calendar is heavily laden with event risk, as Fed Chair Powell's 8:40am ET speech will closely follow the 8:30am ET deluge of retail sales (Apr), Empire and Philly Fed (May), PPI (Apr), and weekly jobless claims data. The US will also release industrial production (Apr) at 9:15am ET and the NAHB housing market index at 10:00am ET. Powell's message will likely continue to be one of patience, echoing the neutral tone he communicated at last week's (May 7) policy decision (hold)."