The US Dollar (USD) is strong and starting off the week with broad gains across all of the G10 currencies as markets respond to the news of a US/EU trade deal agreed over the weekend, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD seeing broad gains vs. G10

"Focus now shifts to US/China talks in Stockholm as officials seek an extension to the recent truce. The distribution of FX returns doesn't appear to be offering any clear signals about the broader market’s tone as we see meaningful underperformance from NZD, EUR and CHF, and 0.5% declines for the AUD and JPY as GBP, CAD, and CNH trade marginally lower. Outside of FX, we’re seeing equity futures push to fresh record highs as the US 10Y yield continues to consolidate around 4.40%, a level at which both its 50 and 200 day MA’s appear to be converging."

"In commodities, we’re seeing a near-term consolidation in the price of oil with WTI hovering just above $65/bbl as copper trades defensively following its recent tariff-driven rally. Gold is also trading defensively, and looks vulnerable to weakness following its sideways consolidation since mid-April. In terms of data, Monday’s calendar is limited to the Dallas Fed manufacturing index."

"However, the remainder of the week will offer considerable event risk as market participants look to Wednesday’s FOMC, Thursday’s PCE inflation, and Friday’s nonfarm payrolls. For the Fed, markets are anticipating a widely expected hold. The meeting offers no forecast update leaving the focus squarely centered on the statement tone and press conference. For the statement, we note the risk of dovish dissents from both members of the board of governors as well as the regional Fed presidents."