FX Daily Strategy: N America, Jun 2nd

The market remains somewhat becalmed by the Trump intervention on the latest Israel-Iran fallout over Lebanon though at the same time still with a sense of heightened uncertainty over resolution of the next interim agreement. That’s reflected in oil’s defensive stance midway between the peak optimism and pessimism of the last few sessions. The dollar likewise has backed off its haven highs but at the same time not giving back that much ground either. Iran has yet to give its response to the latest US version of the MoU and at the moment, despite Trump’s positive noises on a deal being possible in the next week, the market is more sitting on the fence regarding a deal by month end than it was.

That unfortunately remains the start and the end of the market’s focus for now and very little in the way of other news or themes will make much of a dent until there is fresh clarity on how and how quickly this all moves on. FX action will similarly remain very binary across the board.

Lost in the noise has been the latest US ISM meanwhile. While this tends to play to US exceptionalism (growth supported by AI), one side of the dollar smile is very much secondary to the other at present.

Range rejections tended to amplify the action on the most sensitive pairs (NZD/USD turned back from 0.60 band tops for instance and USD/SEK to a lesser extent from 9.2~) but the action is broad based and dollar driven at present, although also highly whipsaw. For example, USD/CHF has been noisy within a tight band of 1 figure + /- stretch since April. For EUR/USD, 1.165 area is still the resting point for the maket until it can escape the current volatility crush and set fresh direction. 

The calendar is very much secondary right now. EZ HICP data was largely as expected, coming in at 3.2% on the headline.

The US has JOLTS turnover data but with the Friday payrolls the next real focal point.