Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Greenback consolidates amid choppy FX markets
The robust US labor market prompted a delay in expectations for Fed rate cuts, now projected for September instead of July. USD OIS rates reflect this shift, with only -4bps priced for July and two cuts expected by December.
US equities rallied, with the S&P 500 futures closing above 6000 and Nasdaq 100 futures climbing above 21800. Strong jobs data outweighed concerns over higher yields. The 2-year yield ended above 4.00%, while the 10-year yield consolidated around 4.50%.
US officials are set to meet their Chinese counterparts in London on Monday, with tariffs and technology expected to dominate discussions.
Antipodeans ie AUD/USD fell 0.25% while NZD/USD fell by 0.36%. USD/SGD rose 0.27%.
Fed policymakers’ top concern is inflation risk
Fed Governor Adriana Kugler stated that because tariffs will have “the first-order effect” on pricing, she is presently more aware of inflation. Prior to being concerned about a possible downturn, “the vast majority of Fed policymakers are first and foremost worried about inflation right now,” she added.
If there are still upside risks to inflation, she is in favor of keeping interest rates unchanged.
According to Bloomberg, she outlines three ways that tariffs may have a long-term effect on inflation: a rise in short-term inflation expectations; opportunistic price rises on goods that aren’t directly impacted by the levies; and decreased productivity that pushes prices higher.
Looking at APAC FX, USD/SGD has edged higher overnight.
Next key resistance levels are at 21-day EMA of 1.2921 and 50-day EMA of 1.3039, where USD buyers may look to take advantage now.
US Treasury requests BoJ measures regarding Yen
In its semiannual currency report, the US Treasury went far further than previously in its policy recommendations for Tokyo, calling on the BoJ to boost interest rates in order to support the yen.
In a report issued Thursday in Washington, the Treasury Department stated that “BoJ policy tightening should continue to proceed in response to domestic economic fundamentals including growth and inflation, supporting a much-needed structural rebalancing of bilateral trade and a normalization of the yen’s weakness against the dollar.”
“Large public pension funds, should invest abroad for risk-adjusted return and diversification purposes, and not to target the exchange rate for competitive purposes,” the US Treasury emphasized in the study.
USD/JPY has gained 0.91% overnight.
From technical lens, the next key resistance is at 50-day EMA of 145.16, and USD buyers may look to take advantage of the positive price momentum.
Antipodeans scale back overnight
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 9 – 13 June
Have a question? [email protected]
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
Leave a Reply