Resource Deal with Ukraine Highlights US Investment Strategy Amid Mixed Economic Signals

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3700-1.3930

Euro                1.5540-1.5790

Sterling           1.8310-1.8550

WTI Oil (opening level) $56.91

The Canadian dollar (CAD) is opening at 1.3815 (0.7238).

Headlines

• The US and Ukraine have reached a deal granting the US privileged access to new investment projects to develop Ukraine's natural resources, including aluminum, graphite, oil, and natural gas. US Treasury Secretary Bessent said, the deal signals the Trump administration's commitment to a peace process centered on a free, sovereign, and prosperous Ukraine.
• Trump acknowledged that his tariff program had a perception problem and posed a significant political risk, but he remained determined to push on, while saying he had "potential deals" with South Korea, Japan, and India, but was "in less of a hurry" than those expressing anxiety over the economy.
• Key US data ahead through Friday after the US dollar largely ignored the weak US Q1 GDP estimate (driven in part by huge tariff-frontrunning trade deficits) and a weak April ADP employment change (+62 vs. +115k expected) number yesterday. Today sees a likely weak US April ISM Manufacturing number (47.9 expected after 49.0 in March, but several of the weekly manufacturing surveys have been weak for April, including yesterday’s April Chicago PMI, which came in at 44.6 vs. 45.9 expected and 47.6 in March). Tomorrow’s main event is the April US jobs report, as Nonfarm payrolls growth is expected to dip to +135k, while the unemployment rate is expected to remain at the post-pandemic cycle high of 4.2%.
• Meta and Microsoft earnings reports after the close yesterday buoyed sentiment in the US equity market, even after a strong comeback from an intraday sell-off earlier in the day.
• The US dollar rebounded strongly amidst the enthusiasm in the US equity market and on a relatively dovish Bank of Japan meeting overnight as USD longs were further trimmed. USDJPY squeezed back higher and rose above the recent highs near 144.00 by late Asian hour, with the 145.00 area the next resistance, followed by 146.50.
• The Bank of Japan kept its policy rate unchanged at 0.5% and halved its economic growth outlook to 0.5% for this fiscal year while pushing back the timing for reaching its inflation target after the global trade war had darkened the economic outlook.

Key Points

• Equities: US equities resurgent overnight on strong earnings reports and commitment to AI spending from Microsoft and Meta Platforms.
• Currencies: USD powers higher on strong risk sentiment for US stock as two of Mag7 posted strong earnings after the close yesterday.
• Fixed Income: US yields dipped yesterday, only rebounded slightly on widespread risk sentiment rebound
• Commodities: Gold’s correction extends further; Supply glut risk weighing on crude prices
• Macro events: US Weekly Initial Jobless Claims and US April ISM Manufacturing