The Greenback has pulled back further from Thursday’s highs, with the DXY down to 97.685 vs 98.373 ahead of the Markit PMIs and US housing data that prompted the relatively abrupt fall from its fresh ytd pinnacle. However, the index is showing signs of stabilisation around support at 97.700 as the Buck bounces vs G10 and EM rivals ahead of durable goods and a long holiday weekend (Memorial Day in the US, and Spring Bank holiday in the UK).
The Loonie and Kiwi are leading the comeback vs their US counterpart, but not the major pack as the NOK and SEK outperform following upbeat Scandi labour data, and improvement in overall risk sentiment and a partial recovery in oil prices that has seen Eur/Nok retreat from 9.8000 and Eur/Sek through 10.7500. The crude revival is also weighing on Usd/Cad to an extent as the pair pivots 1.3450 vs 1.3500+ at one stage on Thursday, while Nzd/Usd is back above 0.6500, partly as Aud/Nzd cross flows reverse from near 1.0600 to 1.0560 on even louder RBA easing shouts overnight. Specifically, Westpac is now predicting 3 rate reductions before the end of 2019 and Aud/Usd is struggling to regain a foothold above 0.6900.
Better than expected, or not as weak as forecast UK retail sales data has supported the recovery in Sterling to a degree with Cable back up near 1.2690 from almost 1.2600 yesterday. Sterling strength then aided the pair to clip 1.2700 to the upside after UK PM May decided to step down on June 7th with a leadership contest to begin in the following week (10th June), although those gains faded as PM May continued her speech with GBP falling back below the figure. In terms of the next steps in UK politics, following the leadership contest, a new Tory leader will be elected towards the end of July. Reports then noted the prospect of a potential general election to take place in October (according to Telegraph’s Christopher Hope) before dialogue with the EU recommences in regard to a Brexit deal.
All relatively flat vs. the Buck following yesterday’s mammoth moves, although the JPY holds onto most of its risk premium having briefly dipped below 109.50 ahead of a Fib at 109.41. The Yen was hardly deterred after Japan’s Government cut their economic assessment in May’s monthly report, which also noted that the Japanese economy is recovering at a moderate pace while the weakness in exports and outputs continues. It’s worth keeping in mind large option expiries in the form of 1.7bln at strike 109.40-50 and 1.8bln between 109.75-85. Similarly, CHF retains most of yesterday’s gains and is ultimately little changed vs the USD and EUR. Elsewhere, the single currency remains just under the 1.1200 handle after having clipped the figure amid the pullback in the Dollar with little to inspire the currency amid the absence of Eurozone data and speakers. EUR/USD currently hovers below its 21 DMA (1.1189) with chunky option expiries in the form of 2.1bln between 1.1170-80 and 2.3bln around 1.1185-1.1200.