ANZ Research previews the US May CPI report on Wednesday

"This week’s focus will be on the May US CPI and PPI data. We estimate headline CPI rose 0.5% m/m, lifting annual inflation to 4.2% from 3.8% in April, while core CPI likely increased by a modest 0.2% m/m, leaving the annual rate at 2.9%," ANZ notes.

"We remain constructive on the USD over the near term. A firmer tone at the June FOMC would therefore reinforce the markets view of hikes ahead. Kevin Warsh’s first meeting as Chair is an additional focal point: with some investors expecting a more dovish starting point than under Powell. We suspect he will be inclined, at a minimum, to avoid validating that perception early," ANZ adds.

• EUR/GBP remains rangebound, holding 0.86-0.87 with little to shift the narrative

• Eyes are on the Makerfield by-election and the political spillover

• Bookmakers pricing an 82% probability of a Burnham (Labour) victory

• Burnham has signalled an intent to challenge Starmer

• Political backdrop likely to underpin the cross above 0.8600-20 support zone

• Near-term resistance stands at 0.8678-80 (100DMA cluster)

• Bias still leans towards EUR/GBP topside on rising UK political risk premium
EURGBP daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

Bank of America Global Research previews the US May CPI report on Wednesday.

"We forecast headline CPI rose by 0.46% m/m driven by another jump in energy prices. The y/y rate should increase from 3.8% to 4.2% -- highest since Apr 23. Meanwhile, core CPI should be cooler at 0.20% (2.8% y/y)," BofA notes.

"This reflects our expectations for modest core goods (+0.05% m/m), a normalization in rent, and softer core services ex rents. For the policy outlook, the focus will be on the implications for core PCE inflation, especially since it's been running above CPI since last Nov," BofA adds.

GBP/USD faces continued near-term pressure, with the pair likely to remain confined to the lower end of its recent 1.33–1.35 trading range as geopolitical volatility, divergent central bank trajectories, and persistent inflation concerns weigh on sentiment.

Sterling dipped toward the lower end of this range, in Monday trading, amid escalating Middle East tensions, underscored by last night's missile exchange between Israel and Iran — a reminder of the fluid risk environment currently in markets. Simultaneously, increasingly hawkish U.S. Federal Reserve rate expectations for 2026 have added headwinds for GBP/USD relative to the dollar. On the domestic front, Bank of England (BoE) rate expectations have softened modestly, with MPC members proffering caution on further tightening. The recent MPC decision to hold rates came in an 8-1 vote, with one member voting for a 25 basis point hike to address persistent UK inflation — a signal that price pressures remain a live concern. BoE Governor Andrew Bailey noted in April that rising oil prices have exacerbated inflation expectations, flagging the need to watch for second-round effects before hiking rates.

This creates a difficult dilemma for sterling. A further escalation in Middle East hostilities could drive oil prices higher, worsening already well-above-target UK inflation and potentially forcing the BoE into a faster and steeper rate trajectory. Paradoxically, such tightening could further constrain sluggish UK growth, amplifying fiscal and political concerns and ultimately weighing on the pound.

The 1.33–1.35 range appears likely to hold in the near term, supported by these offsetting forces. However, any resurgence of Middle East hostilities could embolden sterling bears to test the downside, making geopolitical developments and BoE communications the key variables to monitor.
Sterling Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

Credit Agricole CIB Research highlights the latest update from its FX positioning model.

"The USD took over as the G10 FX largest long following fresh buying interest last week, predominantly driven by Tactical flows. Our FX flow data points at corporates and hedge funds inflows, as well as banks and real money investors outflows," CACIB notes.

"The NZD returned as the biggest short in the G10 FX space after fresh selling interest last week, predominantly driven by IMM flows. Our FX flow data points at corporates, hedge funds and real money investors inflows, as well as banks outflows," CACIB adds.

Goldman Sachs Research revises its Fed rate outlook and no longer expects rate cuts this year.

"We are pushing the final two rate cuts in our Fed forecast back to June and December of 2027. The labor market has been stronger than we anticipated, and we now expect the unemployment rate to rise only a touch further to 4.4%, not enough to create a sense of urgency to lower rates. As a result, we think the most natural path for the FOMC is to delay further cuts until the effects of tariffs, the war, and Al demand have faded and core PCE inflation nears 2%," GS notes.

"We continue to see rate hikes as unlikely, though somewhat more likely than we initially thought...We have left our terminal rate forecast at 3-3.25%, largely because the FOMC's longer-run dots have been stable over the past year and most participants envision further normalization," GS adds.

• USD/CAD testing key resistance zone at 1.3930-67. Clean break here would open up 1.40

• Blowout U.S. payrolls print on Friday raises the importance for Wednesday's U.S. CPI read

• Another hot print would further entrench the recent Fed hawkish repricing - lifting USD/CAD

• Elsewhere, the USMCA deadline nears (July 1), which poses a headwind for CAD

• Headline risk likely to be elevated in the near-term

• Any signal from the U.S. of a USMCA exit would likely see USD/CAD firmly above 1.40
usdcad daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• Low EUR/USD realised volatility above 1.1600 had kept FX option implied volatility near 2026 lows over recent weeks

• Risk reversal contracts and trade flows recognised downside risks to spot, but weren't actively hedging a sudden drop

• The low risk view was reinforced by overnight option prices - they barely registered a risk premium for Friday's US jobs data

• The huge NFP beat therefore took options by surprise and implied volatility was ramped higher - 1-month from 5.0 to 5.85

• Benchmark 1-month 25 delta risk reversals have recently traded new highs for EUR puts over calls since early April at 0.6

• Outright demand for EUR puts with strikes as low as 1.1200 through 3-month expiries have been noted early Monday

• EUR/USD trades 1.1500 where large FX option expiries may contain short term. A close below 1.1513 opens scope to 1.1409

• Latest Mid-East woes add another lay of risk to EUR/USD and broader FX
EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• USD/JPY dropped from 160.39 to 159.85, on Monday, EBS data shows

• However, it remains above the rising tenkan support line that currently comes in at 159.69

• It suffered a setback after hitting 160.39 in Asia, the highest level since April 30

• 160.72 was the peak on April 30 when Japan intervened to buy the yen

• 30-day log correlation between USD/JPY, EUR/JPY is above +0.5 (these pairs are moving in tandem)

• Japan Q1 GDP lower but still strong, BOJ to stay course

Daily Chart


Correlation Chart


(Martin Miller is a Reuters market analyst. The views expressed are his own)

• AUD/USD slid to 0.7016 in Asia, as stock losses hurt risk-sensitive AUD

• 0.7016 is two-month low. Kospi closed down 8.3% (biggest daily fall since March 4)

• Friday's low was 0.7038, as USD jumped on strong U.S. jobs data

• 0.7144 was Friday's high - before the U.S. employment report was published

• CFTC data showed net AUD long fell 30% to 41,812 contracts in week to June 2

• Decline followed 29% drop from 13-year high of 85,644 contracts in the prior week

AUDUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• Cable holds sub-1.3350 following its drop to 1.33165 (three-week low in Asia)

• Higher oil prices on Middle East news supports safe-haven dollar

• Israel hits Iran petrochemical plant in new strikes despite Trump reprimand

• 1.33315 was Friday's low, after USD strengthened on strong U.S. jobs data

• Friday's high was 1.3483 - before the U.S. employment report was published

• MPC dove Taylor sees BoE rates on hold barring worst-case scenario

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• Last weeks initial failure to break above 160.00 saw USD/JPY option implied volatility suffer beside its G10 peers

• Friday's NFP beat reignited upside pressure, boosting vols as USD/JPY pushes above 160.00 and intervention risk returns

• Benchmark 1-month implied vol reclaims recent highs, recovering to 7.4 from 6.4, other tenors marginally firmer

• Risk reversals retain firm JPY call premium over puts — 1-month 25-delta holds 1.05, flagging intervention concerns

• Notably, rising USD/JPY would typically see JPY calls lose ground to puts, making the persistent skew an anomaly

• Sub 1-month 10 delta butterfly spreads regain recent multi-year highs - reflecting USD/JPY breakout fears

• Elevated butterflies signal higher vol premium for low-delta puts and calls vs ATM, reflecting demand for tail risk hedges

• Related comment - The FX options market gets its wake-up call
Benchmark 1-month expiry FXO implied volatility


USD/JPY 25 delta risk reversals


USD/JPY 10 delta butterfly spreads


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• FX options expire at 10am New York / 15:00 GMT on Monday 8 June

• EUR/USD: 1.1500 (1.2BLN), 1.1520-30 (715M), 1.1550 (701M), 1.1570-80 (1.3BLN), 1.1600 (1.9BLN), 1.1615-20 (1.6BLN)

• GBP/USD: 1.3390-95 (351M), 1.3405 (280M), 1.3450 (1.1BLN)

• AUD/USD: 0.7050-55 (262M), 0.7140-50 (1.1BLN)

• NZD/USD: 0.5840 (233M), 0.5910 (203M)

• USD/CAD: 1.3830 (320M), 1.3850 (325M), 1.3905 (503M)

• USD/JPY: 160.00 (3.4BLN), 160.25 (941M), 160.85 (200M), 161.00 (395M)(Richard Pace is a Reuters market analyst. The views expressed are his own)

(Corrects milestone in headline)

• AUD/USD up 0.1% in Asia after trading in a 0.7016-0.7060 range

• Opened at 0.7036 after 0.7043 New York close, dropped on risk aversion

• Iran fires missiles at Israel after Beirut strike; Israel retaliates

• Trump says new Israel, Iran strikes won't affect peace deal

• Asia stock markets fall after Fri tech selloff; Nikkei -3.8%, Kospi -5%

• Bargain hunting, profit taking lift pair from day low, high of 0.7060 trades

• Thin market exacerbates swings; most of Australia closed for a holiday

• Support 0.7000-05, 0.6980, 0.6940-50, resistance 0.7075-85, 0.7110
AUD:

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

• USD/JPY pushed up to as high as 160.34 EBS Friday but no Japan intervention

• Strong US jobs report and higher US yields, broad USD strength factors

• Japan MOF couldn't act in light of such factors? But threat of action still

• USD/JPY limited still on this threat, Asia so far today 159.86-160.36

• Could be the start of a choppy session with market nervous

• Spot cleared tapering, now lower daily Ichimoku cloud, above 159.67 tenkan

• Also well clear of ascending hourly cloud, tenkan 160.11, kijun 160.04

• In options, massive $3.4 bln in expiries today at 160.00 strike

• Also total $1 bln or so between 160.25-30 strikes close to current spot

• US yields up but JGB yields too, little change in rate differentials

• With no real moves towards peace in Middle East, USD to remain better bid?

• Crude oil prices up again early Asia after NY declines Friday

• Related comments , , ,

• Also , on US jobs report

• US markets , , ,

• More on US stocks , for more click on [FXBUZ]

USD/JPY:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• AUD/USD down 0.2% early Monday after closing 1.27% lower on Friday

• Opens at 0.7036 after 0.7043 New York close, trades a 0.7016-0.7039 range

• Escalating Middle East tensions add to risk aversion

• Israel strikes Beirut despite truce, prompting retaliation attempt from Iran

• Stocks selloff, Fed rate expectations, broadly stronger USD weigh on AUD

• Chip slump erases $1.3 trillion in stock market value

• Fed Dec rate hike chances jump to 78.5% on CME Fedwatch tool after jobs data

• Support 0.7000-05, 0.6980, 0.6940-50, resistance 0.7075-85, 0.7110

• Markets in Sydney and Melbourne closed Monday; Friday range 0.7038-0.7144
AUD:

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

• USD net spec G10 long -$0.03bn in the May 27-June 2 imm period; $IDX +0.13%

• Data may be mooted after today's upside US payroll surprise lifted hawkish Fed view

• The dollar gained considerably after the data; Trump now leaving pot'l cut to Warsh in October

• LSEG's IRPR now pricing 64% chance of Fed hike in Oct, Dec hike fully priced

• EUR$ -0.1% in period; specs +19.4k contracts now +48.9k; ECB exp'd to hike in June

• $JPY +0.41%; specs -14.9k contracts now 130k; converging Fed-BoJ view keeps 160 in focus

• Yen short tops $10bn, pair hovers near 160, tipped MoF intervention lvl; BoJ seen hiking in June

• GBP$ +0.12%; specs +9.2k contracts now -52.2k; Fiscal, political concerns ebb kept GBP well bid

• $CAD +0.2%; specs -25.2k contracts now -94.1k; BoC hawkish tones ebb, growth diminishing

• AUD$ +0.2%; specs -18.3k contracts now +41.8k; converging Fed-RBA view saps AUD vigor

• Global rates/inflation fluid, see LSEG's IRPR pages for clues to c.bank policy expectations

IMM Position Table as of Jun 2:


Majors w/IMM performance as of June 5 Chart:


(Paul.Spirgel is a Reuters market analyst. The views expressed are his own)

• GBP$ soft in NY afternoon trade, -0.57% at 1.3347; NorAm range 1.3483-1.3343

• Pair turned offered after US employment data surprised higher fomenting hawkish Fed tone

• LSEG's IRPR now pricing full hike by Dec 2026, 60% odds in Oct; December was 60% pre-data

• No discernible progress on Mideast peace aids USD bid, despite near-3% slide in oil

• Traders also cast gaze on Makerfield by-election Jun 18; Starmer regime still seen at risk

• GBP$ supt 1.3341 Friday low, 1.3327 lower 30-d Bolli, 1.3304 trend low on May 18

• Res 1.3400 psychological lvl, 1.3422 daily conversion line, 1.3483 Fri high/daily cloud top/ multiple DMA area

GBP Chart:


(Paul.Spirgel is a Reuters market analyst. The views expressed are his own)

ANZ Research discusses USD/JPY outlook and the scope for another wave of JPY intervention.

"USD/JPY surpassed 160 for the first time since April when FX intervention took place. Renewed USD strength and a further widening in US-Japan rate differentials drove the rise. While Governor Ueda’s latest remarks carried a more hawkish tone – with greater emphasis on upside inflation risks and the cost of falling behind the curve – the broader policy backdrop remains challenging for the JPY. Markets are now pricing a high probability of a 25bp hike at the upcoming BoJ meeting, and the presence of three hawkish dissents at the last meeting suggests the board is, at the margin, shifting in a less accommodative direction. With US yields still elevated, a move in the BoJ policy rate toward 1% is unlikely in isolation to materially alter the yen’s rate disadvantage. In that environment, USD/JPY is likely to remain biased higher near term, increasing the risk of more forceful verbal intervention from Japanese authorities," ANZ notes.

"Next week, the key USD/JPY level is 160.72, year-to-date high, followed by 162, particularly if US data continue to support the USD. The risk of intervention by Japanese authorities is high, but its effectiveness is uncertain. Officials may prefer to wait until after the upcoming BoJ and FOMC meetings before deciding whether to act," ANZ adds.

• Cryptocurrency and blockchain-related stocks slide on Fri, as bitcoin slumps for sixth straight day

• Bitcoin, world's largest cryptocurrency, recently down 4.4% to $60,805.85 after falling as low as $59,786.72, lowest since Oct 2024

• Ether plunging 10% to around $1,591, an over one-year low

• Crypto exchange Coinbase Global down >8% on Fri

• BTC hoarder Strategy down 9% after hitting a four-month low

• Retail trading platform Robinhood Markets down ~8%

• Crypto miners Mara Holdings , Bit Digital

and Riot Platforms all down >10%

• Ether-linked stocks sag: Bitmine Immersion Technologies

and Sharplink Gaming both down about 10%

• ProShares Bitcoin Strategy ETF and iShares Bitcoin Trust ETF both off >4%, while iShares Ethereum Trust ETF down 11%

• BTC now off roughly 30% YTD and about 50% from its all-time high of around $126,000 touched in Oct 2025
(Lance Tupper is a Reuters market analyst. The views expressed are his own)

Credit Agricole CIB Research previews next week's ECB June policy meeting.

"In the near term, EUR investors will focus on the outcome of the ECB meeting. With a 25bp rate hike almost fully priced in at the time of writing, key for the EUR outlook would be the bank’s updated forward guidance. The ECB should maintain its data-dependent policy approach while its updated forecasts could point at intensifying downside risks to growth and a lack of broad-based second-round inflation effects," CACIB notes.

"A ‘dovish hike’ by the ECB would thus do little to boost the EUR rate appeal and leave it vulnerable amid persistent geopolitical risks," CACIB adds.

• Cable drops to 1.3395 as strong U.S. employment data boosts dollar

• 1.3395 is the lowest level since May 28 (1.3368 was the low that day)

• Strong U.S. jobs data is boost for hawks advocating Fed hike in Q3/Q4

• First Fed meeting to be chaired by Warsh scheduled for June 16-17

• 1.3483 was one-week high for GBP/USD during the London morning

• Scottish government to sound out investors for debut 'kilts' bond sale

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

Bank of America Global Research likes short EUR/USD exposure in the near-term, while maintains a bullish bias over the medium-term.

"US real rates have risen vs. other major economies due to the resilience of the consumer and labour market following the energy shock, which also suggests policy rates are not as restrictive as commonly assumed. Unlike the EUR, the dollar has benefited from the pricing of a Fed hike. We think there is room to price more tightening on US data & the shift in Fed rhetoric, although Warsh's view at the June FOMC will be key. For now the balance of risks continue to favour short EUR/USD," BofA notes.

"Our medium-term EUR view remains largely constructive. For EUR-USD, levels below our 2Q forecast of 1.14 would be an opportunity to raise USD hedges, on eventual growth convergence, Iran normalisation, and supportive valuations," BofA adds.

CIBC Research discusses its reaction to today's US and Canada May jobs reports.

"Hiring remains strong in the US in May, with 172K jobs added well above the 88K consensus expectation. Previous two months were revised up, April revised up by 64K and March revised up by 29K. Private sector added 120K jobs, leisure and hospitality added 70K and health care/social assistance adding 47K, remaining strong for the last three months. Government added 52K jobs. The unemployment rate remained steady at 4.3% as expected. The participation rate remains the same at 61.8%. Aggregate hours worked slowed to 0.1% m/m. Wage growth accelerated to 0.3% m/m from 0.2% in April, but overall, the report suggests that the US labor market is on solid footing and remains in balanced territory," CIBC notes.

"The Canadian labour market sparked back to life in May, with the 88K gain in jobs well above consensus expectations and taking the unemployment rate back down to 6.6%.  Job gains were driven by full time work, with the sector breakdown showing particularly strong growth in construction, information & recreation, transportation and manufacturing. However, while much stronger than expected, the release should be viewed in the context of the weakness seen earlier in the year. For the Bank of Canada, today's release shouldn't change the current on-hold stance, even with the large headline beat. For now today's strength has brought us back to where we stood earlier in the year, and further tightening in the labour market will need to be seen (alongside an acceleration in core inflation) to bring the Bank of Canada off the sidelines," CIBC adds.