Dollar Strengthens Amid Bad Vibes from Ceasefire Talks and Tense U.S. Politics – Currency Thoughts

Dollar Strengthens Amid Bad Vibes from Ceasefire Talks and Tense U.S. Politics

May 19, 2026

In there deepening impasse, the U.S. and Iranian negotiators have seemingly moved further away from any willingness to compromise their demands. Trump claims to have postponed a planned obliteration of Iran to give peace one last chance, but Iranian negotiators treated his revelation as a bluff. Trump, too, seems to be holding fewer cards, as polls put his approval ratings at their lowest point of his second term and show widespread dissatisfaction with how the war has been handled and the fact that it was waged in the first place. Meanwhile, two domestic negative news stories have surfaced: an attack in Santa Fe on worshipers at a mosque and reports of a huge retribution slush fund to compensate Trump supporters claiming damages from previous governments for their allegiance to him. Mid-term elections are now less than a half-year away.

The dollar continued to attract safe haven-seeking investments  overnight, climbing 1.5% against the won, 1.0% versus the Australian dollar, 0.8% relative to the kiwi, 0.7% vis-a-vis the Swiss franc, 0.5% against the euro and 0.4% versus sterling. The yen only dipped 0.2% against the U.S. currency but is now again very close to the JPY 160 red line that arouses speculation about Japanese forex intervention support. The dollar also  went up just 0.2% against the Canadian dollar, blunted by the loonie’s tendency to trade in a narrower band than do other currencies but also perhaps  in response to lower-than-forecast Canadian inflation figures released this Tuesday. The Indonesian rupiah extended its record low to 17,771 per dollar, representing a 6.2% slide since the start of this year.

Other financial market changes today include

• A rise in 10-year sovereign debt yields of 9 basis points in the United States, 7 basis points in Italy, 6 bps  in Japan, France and Spain and by 4 bps in Germany and Great Britain.
• The price West Texas Intermediate crude oil eased back 0.7% but remains very elevated at roughly $108 per barrel, with scant traffic moving through the Strait of Hormuz and reports of attacks on some energy facilities in the region.
• U.S. equities are flashing red with drops ranging from 0.4% in the DOW to 1.8% in the Russell 2000.
• Other country stock markets show mixed changes, with declines of 3.5% in Indonesia, 3.5% in South Korea, 1.8% in Hong Kong and 0.4% in Japan and Italy but gains of 1.6% in New Zealand, 1.2% in Australia, 0.9% in China, 0.6% in France and 0.5% in Hong Kong.
• Prices have fallen by 3.7% in the case of silver, 1.4% in gold and 0.9% in Bitcoin.

Japan reported first-quarter GDP and March figures for industrial production, capacity usage, and the tertiary index.

• GDP grew 0.5%, equivalent to 2.1% at an annualized rate, which was more than forecast and more than twice the 0.8% annualized pace in the previous quarter. GDP got positive contributions from personal consumption, residential construction, non-residential investment, other business investment, and net foreign demand, but inventory changes exerted a modest drag. Real GDP was only 0.6% above the year-earlier quarter, and the GDP price deflator put inflation at 3.4%.
• Industrial production‘s decline in March was revised slightly lower to 0.4% from 0.5% reported initially. Compared to March 2025, industrial production grew 2.4%, most in 9 months and well above the average 0.3% contraction in all of 2025.
• Capacity utilization, which had risen 1.1% in 2025,  fell 1.2% on month but was 4.2% higher than a year earlier.
• Japan’s tertiary index of service sector activity slid 0.2% on month but recorded its biggest year-on-year advance (2.6%) in three months.

Portuguese producer price inflation swung to a 37-month high of +3.3% in March from zero  percent in February and -3.5% in January.

Malaysian PPI inflation edged only 0.2 percentage points higher to 1.9% because core PPI unexpectedly edged down to 2.0% from 2.1%.

Moldovan PPI inflation of just 1.1% last month was at a 16-month low.

Canadian consumer price inflation accelerated 0.4 percentage points to 2.8% in April, but analysts had been anticipating something above the 3.0% level. Measures of core inflation were in fact a bit lower than in March.

The latest batch of British labor market statistics included an unexpected uptick in the jobless rate to 5.0% in 1Q from 4.9% in December-February; the biggest 3-month advance of jobs (148k) in eight months; a rise in labor productivity of 0.9% on quarter but only 0.4% on year in 1Q 2026; and average weekly earnings growth of 4.1% overall and 3.4% for regular pay in the first quarter. The 3.4% increase excluding bonues was the lowest reading since October 202o.

Euroland’s trade surplus narrowed in March to a 9-month seasonally adjusted low of EUR 3.5 billion, down from 6.5 billion euros in February and EUR 11.0 billion in January. Import growth of 3.5% outflanked the 2.1% rise in exports. On an non-seasonally adjusted basis, the surplus imploded to EUR 16.6 billion in the first quarter from EUR 55.4 billion a year earlier. Another sign of the region’s bleak economic outlook was highlighted by Euroland’s index of leading economic indicators, which dropped 0.4% in April after a decline of 0.5% in March.

U.S. pending home sales increased in April by 1.4% and was 8.2% greater than a year earlier.

Copyright 2026, Larry Greenberg. All rights reserved.

Tags: British labor market data, Canadian consumer prices, Euroland trade surplus, Japanese GDP

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on Tuesday, May 19th, 2026 at 9:14 am and is filed under New Overnight Developments Abroad – Daily Update.
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