USD, JPY, EUR flows: USD slightly firm as US and Iran skirmish
Skirmishing between the uS and Iran overnight has had only a modest USD positive and risk negative impact so far, but...
Despite the clashes between US and Iranian forces in the Gulf overnight, the market impact has been modest, with US equities still close to all time highs and most of the riskier currencies outperforming the JPY. Japanese wage data overnight came in weaker than expected, but real wages are still rising, which should allow the BoJ to tighten in June. German industrial production this morning disappointed with a 0.7% decline, and the underlying trend appears to be weakening, so we do see a rationale for the EUR to soften, even though the ECB seem intent on a rate hike.
The US employment data will be the focus this afternoon, but if there is no progress on agreeing a US/Iran deal, there is a risk of a more substantial risk correction into the weekend, with the USD likely to benefit but the JPY also having potential for significant gains on the crosses.
