• S&P Global US April flash services PMI 53.7 vs 51.5 expected
• Canada February retail sales -0.2% vs -0.6% expected
• BOE’s Ramsden: High inflation is a bigger risk tthan over-tightening
• US five-year credit default swaps rise to 51 basis points
• The Federal Reserve heads into the blackout period tomorrow
• Earnings calendar for next week highlighted by Microsoft, Meta, Amazon, Alphabet, Intel.

Markets:

• S&P 500 flat at 4155
• WTI crude oil up $0.43 to $77.80
• US 10-year yields up 2.3 bps to 3.568%
• Gold down $22 to $1982
• EUR leads, CAD lags

The daily changes in the largest currencies on Friday were minimal but the day wasn’t without drama. In particular, the US PMI from S&P Global led to a sharp rally in the US dollar, including 100 pips in USD/JPY and half that in EUR/USD and GBP/USD. The report was surprisingly strong including high numbers on new orders and price pressures that few people saw coming.

Some skepticism set in after the numbers though and the dollar move faded. Ultimately, the dollar rally completely reversed (and more) against the euro and pound. USD/JPY held onto about 60 pips of gains from the low but that was still not enough to erase the losses from European trading.

There mood in the markets is uncertainty right now. For every data point that indicates a recession, there is one that shows the economy on solid ground. This week a soft Philly Fed cranked up the recession talk again only for it to be undercut by the number today. Next week there is another round of data but the market is less likely to be swayed by second-tier data points unless a few run in the same direction.

One worrisome sign was the underperformance of commodity currencies. It came despite gains in oil, though copper was down slightly and gold fell 1%. Some pointed to softer global manufacturing PMIs today as a worrisome sign for global resource demand and that could have been a factor.

The loonie was especially soft but that owes to weak details in the Canadian retail sales report. I’ll repost here what I told Reuters.

„High mortgage rates are starting to bite Canadians‘ wallets,“ said Adam Button, chief currency analyst at ForexLive. „Canada is particularly sensitive to higher interest rates and that will lead to divergence in U.S. and Canadian economic performance in the second quarter and beyond.“

This article was written by Adam Button at www.forexlive.com.