Friday finds a number of major currencies starting to rebound against the US dollar amid a flurry of market moving developments heading into the weekend. Stocks and energy commodities have been holding steady.

The war of words over North Korea continues to escalate. In response to threats from President Trump at the UN earlier this week, and new sanctions announced Thursday, North Korea has threatened to test a hydrogen bomb in the Pacific Ocean. This sparked a move of some capital back into defensive havens sending gold and the Yen back upward. That being said, gold remains below $1,300 a level it would need to retake to indicate a serious move has started and not just a trading bounce.

Sterling has slipped back slightly ahead of UK PM May’s big speech on Brexit today. Negotiations haven’t been progressing as fast as some would like and it’s expected that she may be set to discuss new strategies heading toward the next round of negotiations. Reports suggest for example, that she could propose openness to a 2-year transition period to 2021.  Traders should note that of late, signs of strength on the UK side (and complaining form the EU) have boosted the pound, while signs of UK weakness or capitulation could undermine GBP. 

The Euro is trading higher this morning but remains unable to regains $1.2000 against the US Dollar. Trading in EUR pairs could be impacted by a number of developments including, the flip side of reaction to PM May’s speech, positive reaction to very strong flash PMI reports out of France and Germany and preparations for Sunday’s German election results. Chancellor Merkel is widely expected to win another term in office, which would be seen as favouring the establishment, but how well or poorly the right wing Alternative For Germany party does could indicate whether populist/anti-EU forces have been fully defeated or not.

The New Zealand Dollar is trading higher in the last day of trading before the General Election. In recent weeks, traders have reacted positively to polls and news favouring the incumbent National Party and negatively to polls and news favouring Labour. The two parties have been trading the lead back and forth in recent weeks. Lately, National has been in the lead, but it’s unclear if it will be able to win a Majority government or have to seek out coalition partners. A lot may depend on whether the Green party gets enough votes to qualify as a party in Parliament.

CAD is also picking up today ahead of Canadian consumer price inflation and retail sales reports. Earlier in the week Bank of Canada Deputy Governor Lane threw a bucket of cold water on speculation of a third 2017 rate hike but these reports could indicate how much pressure the bank is under to actually make another move.