North American Summary and Highlights 3 June
Overview - The USD was mostly firmer but came off its highs as USD/JPY failed to break 160.
North American session
With Middle East tensions rising after a strike on Kuwait Airport, the USD was stronger as UST yields and oil picked up and equities slipped. USD/JPY nudged cautiously above 160 while EUR/USD stabilized near 1.16. EUR/GBP rose to .8645 from .8635 while EUR/CHF advanced to ,.9190 from .9165. AUD/USD slipped to .7130 from .7160 while USD/CAD rose to 1.39 from 1.3860.
While focus was elsewhere US data was on the firm side, with May’s SADP employment report up by 122k and May’s ISM services index rising to 54.5 from 53.6. The Fed’s Beige Book was marginally stronger on activity and significantly stronger on prices than in the last report, but Fed’s Williams maintained a moderate tone, still seeing no urgency to move rates.
European session
Very much a sense of disquiet over ongoing Iran standoff and flare ups, with crude up around $2 ½, continuing the upward correction, and the dollar holding more of a haven bias again, if still within recent bands. NZD and SEK still tending to be the higher beta pairs. EUR/USD back towards 1.16~ support again.
USD/JPY seeing the liveliest intraday action into and through BoJ Ueda’s speech in a couple of bursts of positional adjustment from 160~ to 159.30s~, before back to balancing out just off the key figure in the 159.70-80s again. Ueda reiterated basic stance of continuing to raise rates while baseline remains probable, and stresses upside inflation risks, financial conditions remain supportive, and the dangers of delaying action if it impacts market trust. All in all, comments back a June hike.
UK final service PMI at 49.3 (flash 47.9), with composite 49.7(48.5). Eurozone final composite PMI 48.5, lowest since Nov24 but above the prelim 47.5, with services at 47.7 (flash 46.4)
OECD latest forecasts come in largely unchanged with the main slight downgrade for Japan. Quite a dovish stance on the BoE, seeing policy on hold until Q1-27, before being cut to 3.5%. ECB also seen more measured with the one hike and then reversal.