The dollar index rose 0.15%, with EUR/USD down 0.1%, hovering above Wednesday's lows that erased the rally triggered by Friday's quite dovish U.S. data, as the focus shifts to the May 15 CPI and retail sales reports, and as the yen continued to slide broadly.

EUR/USD only briefly recovered from Wednesday's 1.0735 low by the 50% Fibo of last week's rally and other nearby supports, moving in line with bund-Treasury yields spreads.

The dollar was broadly higher earlier in the day as its Treasury yield-led drop following Friday's dovish U.S. jobs and ISM reports came in for a further correction, except against the yield-bereft yen.

The durability of that correction will next be tested by the May 15 CPI and retail sales data.
Presently, the Fed is priced to likely cut rates in September and December, while the ECB is expected to begin easing next month, with three cuts by year-end.

Those Fed and ECB market outlooks haven't been influenced much by this week's second-tier economic data or Fed speakers, though Federal Reserve Governor Lisa Cook's fairly sanguine comments regarding the financial shape of households, banks and firms may have aided a late firming of Treasury yields and the dollar.

The Riksbank rate cut on Wednesday followed the SNB's recent move and is seen setting the stage for the ECB to also ease.
The pace of easing in Europe will be governed to some extent by the pace of Fed cuts, because too much policy divergence could cause dollar gains and European import price inflation.

USD/JPY rose 0.58%, extending its recovery from last week's 160.245-151.86 dive on suspected MoF interventions, culminated with Friday's weak U.S. data.
Prices are now nearing the mid-point of that plunge at 156.05.

There is some concern that the yen will be propped up again if it falls toward last week's peak, but the 20bp of further BoJ rate hikes priced in by year-end hasn't shifted amid hints the BoJ might have to carry more of the yen supporting load for the MoF.

Sterling fell 0.1% on the approach to Thursday's BoE meeting that is widely expected to leave rates unchanged.
The focus will be on whether there are more votes for rate cuts, and from whom.

Markets currently fully price in a first BoE rate cut in August and one more before year-end.

Wednesday's 1.2469 sterling low nearly retraced 50% of the April-May 1.2299-634 rebound that faltered between the 100- and 200-day moving averages, as Gilts-Treasury yield spreads bearishly diverged from Friday's high, and gains linked to risk-on flow faltered this week.

Aussie fell 0.33%, extending its pullback from May, April and March highs near 0.6650, the reciprocal of which is 1.5, this week after another RBA hold and softer Australian retail sales.

U.S.
jobless claims on Thursday will get a look as a nearly real-time gauge of the labor market, the condition of which appeared to cool in last week's payrolls and JOLTS reports.

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