Goldman Sachs Research previews the US May CPI report on Wednesday.

"We forecast that the core CPI rose a soft 0.17% in May (vs. consensus +0.3%) and 2.79% year-over-year. We expect benign 0.22% increases in rent and OER, another large increase in airfares (2%) due to higher jet fuel prices, and downward pressure from residual seasonality on the communication categories," GS notes.

"We forecast that headline CPI rose 0.45% in May and 4.17% year-over-year, up from 2.43% in February. Our forecast is consistent with a larger 0.27% increase in core PCE prices in May, which will get a boost from the impact of higher equity prices in April on financial services," GS adds.

• Cable eyes 1.34 after extending north from 1.3331 (Asian session low)

• 1.34 is a former support point (1.3407 was June 1 low)

• Ascent towards 1.34 spurred by global stock gains (GBP is risk-sensitive)

• 1.3420 (200-day moving average) is a resistance level beyond 1.3400

• Last Friday's high was 1.3483 - before USD jumped on strong U.S. jobs data

• BoE warns of scams after fake video shows brawl with Reform UK's Farage

GBPUSD


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

• Overnight expiry options now include Wednesday's US CPI data - arguably more important after Fri's NFP surprise

• However, overnight expiry USD/JPY implied volatility has traded below 6.0 - remarkably cheap for any event risk of late

• Premium/break-even for a straddle just 40 JPY pips in either direction - already low pre NFP at 53 JPY pips

• USD/JPY is well contained at 160.00 as intervention threat caps, but this premium still looks notably underpriced

• Dealers point to long gamma from more expiring trigger type options in the mid 160.00's as the likely culprit

• Long gamma typically pressures near dated implied volatility and helps to suppress realised volatility

• With vol this cheap, it wouldn't take much realised volatility to reward option holders hedging CPI data risk
Overnight expiry USD/JPY FXO implied volatility


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

• Japan issues a warning on yen, bond yields as fiscal pressure mounts

• However, USD/JPY looks set to test Japan's resolve

• USD/JPY has seen a 160.06-160.29 range, on Tuesday, EBS data shows

• There is scope for a 2026 160.72 high retest, April 30 peak when Japan intervened in yen

• It remains above the tenkan support line that currently comes in at 159.69

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

Daily Chart


Correlation Chart


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

EUR/USD hit new lows since March 31 at 1.1500 early Monday but failed to close below the key 76.4% Fibonacci retracement of the March-April rally from 1.1409 to 1.1849 at 1.1513. That failure and subsequent recovery to the 1.1550s, is what technicians call a bear trap — and it has offered bulls some encouragement, but the options market is not yet convinced.

The options market tells a more cautious story. Implied volatility spiked as EUR/USD key supports and daily lows from mid-late May at 1.1587-77 gave way in the wake of Friday's big NFP data beat. The Benchmark 1-month implied volatility climbed from 5.0 pre-NFP to a peak of 5.85 early Monday, before easing back to 5.5 as the spot price settled higher. However, more tellingly, the 1-month 25-delta risk reversal — which measures the implied volatility premium for EUR puts over calls — rose from 0.25 before NFP to 0.625 on Tuesday, a new high since early April, despite the mild spot recovery.

That measure of perceived downside risk is reinforced by outright demand for EUR put/USD call strikes, too. On Monday there was a pick-up in demand for 1-3-month expiry EUR put options with strikes as low as 1.1200. These would benefit from deeper EUR/USD losses, especially if accompanied by renewed implied volatility gains.

With markets likely to stay sidelined ahead of Wednesday's U.S. CPI, and the June 17 Fed meeting increasingly viewed as the key near-term USD risk event, a clearer directional signal may have to wait. For now, the bear trap may have been sprung — but bulls still have plenty to prove and options are not relaxing their risk premiums for any renewed EUR/USD weakness.
EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals


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

• EUR/USD hit new lows since March 31 at 1.1500 early Monday, but has since recovered to the 1.1550's

• 1.1513 is 76.4% Fibo retracement of the March-April rally from 1.1409-1.1849 - bears needed a close below

• Failure to close below key a technical level and subsequent bounce is called a bear trap - often a bullish signal

• Bullish EUR/USD and renewed USD weakness aligns with Morgan Stanley's latest FX strategy note

• 1.1553-28 is Tuesday's range - regaining prior supports at 1.1577-87 may ease fears of deeper declines

• Big FX option strikes at 1.1500 and 1.1550 can help contain range into the 10-am New York cut expiry

• Markets may remain sidelined ahead of Wed's US CPI, but June 17 Fed now seen as key near term USD/FX risk
EUR/USD daily chart (EBS)


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

• AUD/USD rises to 0.7071 as Asian stock gains buoy risk-sensitive AUD

• Kospi closes up 8.18%. 0.7071 is seven pips shy of Monday's peak

• Monday's peak was scaled after Iran and Israel halted attacks on each other

• 0.7016 was Monday's two-month low, as Asian stock losses weighed on AUD

• Friday's high was 0.7144 - before USD jumped on strong U.S. jobs data

• RBA rate hold expected next week (June 16), before Warsh chairs first Fed meeting

AUDUSD


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

• Cable rises to 1.3374 as risk-sensitive pound benefits from Asian stock gains

• 1.3374 is the highest level since Monday's three-week low of 1.3307

• Monday's high was 1.3368, after Iran and Israel halted attacks on each other

• Offers might emerge near 1.34 (former support point) if GBP/USD extends north

• Friday's high was 1.3483 - before the dollar jumped on strong U.S. jobs data

• M&A news: UK's GSK to buy US-listed Nuvalent for $10.6 billion

GBPUSD


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

• AUD/USD flat Tue as markets seek clarity on confusing Middle East situation

• CN May trade balance $105.4 surplus, beats expectations of +$92.1 bln

• U.S. pressure on Iran & Israel to stop attacks yields mixed results

• Israel's maritime navigation in the Red Sea at risk of Houthi intervention

• Former 0.7080 support now becoming resistance; downside extension likely

• Westpac Jun consumer sentiment 80.6, one of the worst results on record

• CN May inflation data & U.S. CPI due Wed, U.S. May PPI due Thur

• Range Asia 0.70345-59, support 0.6834, resistance 0.7080 0.7200 0.7283
AUD Daily 55-DMA


DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

June 9 (Reuters) - USD/JPY players appear to be hunkering down for more range trading, this time around 160.00. The pair hit a high of 160.39 EBS on Monday, and the market is preparing for consolidation around 160.00, much like the situation from mid-May when USD/JPY consolidated around 159.00. The threat of Japanese FX intervention has weighed on the markets since mid-May, and will likely continue to limit and slow upside moves. The lack of recent intervention may reflect reduced speculative interest in USD/JPY as trading accounts shifted their attention to equities, which have shown more volatility and profitability. The Mrs Watanabes of Japan and perhaps the world are more actively trading Japanese equities. Anecdotal evidence suggests younger players, including high-school and college students, are joining the herd of day-traders, upping the overall involvement in stock trading, looking to boost disposable income and tuck money away for the future. Tokyo FX speculative trading has therefore ebbed, aside from some carry interest. This has not resulted in less USD buying out of Tokyo however. Solid, continuous demand persists from Japanese importers facing higher import costs, exacerbated by geopolitical developments, and this shows no signs of letting up. To wit, such demand has been apparent at most Tokyo fixes for over a year . Barring actual Japanese intervention, USD/JPY will likely consolidate around 160.00 with the bias remaining to the upside. Massive importer option barriers are tipped at 162.00 and especially 165.00, and could be potential points of contention going forward.

Related comments , , , , .
USD/JPY:


Nikkei 225:

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

• AUD/USD +0.1% Tue, although broader sentiment retains negative bias

• Pair may struggle to retake 0.7080; move toward 0.6834 support possible

• Westpac Jun consumer sentiment 80.6, one of the worst results on record

• Trump's pressure on Iran & Israel to stop attacks moderately successful

• Yemen's Houthis vowing to block Israeli maritime navigation in the Red Sea

• CN May trade balance due Tue, Reuters poll consensus $92.1 bln surplus

• Range Asia 0.70345-52, support 0.6834, resistance 0.7080 0.7200 0.7283
AUD Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• USD/JPY continues to consolidate on or around 160.00, Asia 160.14-22 EBS

• Follows 159.85-160.39 range yesterday, no Japan intervention but threat on

• Daily chart shows support from 159.68 Ichimoku tenkan line

• Hourly tenkan 160.15 ahead, kijun 160.12, hourly cloud 159.97-160.07

• $1.9 bln 159.00-50 option expiries today, supportive

• $1.4 bln 160.00-25 strikes to contain spot? $1.2 bln 160.50-161.00 above

• JGB-US Treasury rate differentials wider, discounting Fed rate hike?

• Market still expects BOJ to hike by only 25 bps, outlier for more however

• Middle East developments still a concern, Ukraine-Russia too

• Geopolitical factors to continue to boost USD haven demand

• Related comments , , ,

• And , also

• US markets , , ,
USD/JPY:


USD/JPY nearby option expiries this week:

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

• NZD/USD +0.5% from Mon 0.5779 low as Middle East re-escalation fears abate

• NZ Q1 manufacturing sales +3.6% after dairy & meat exports surged 6.6%

• U.S. pressure on Iran & Israel to cease attacks partially successful

• Yemen's Houthis threaten to block Israeli maritime navigation in the Red Sea

• DXY targeting 100.64 resistance after breaking higher on inflation concerns

• NZD break below 0.5859 55-DMA sets up extension towards 0.5680 support

• CN May trade balance due Tue, Reuters poll consensus $92.1 bln surplus

• Range NZ 0.5808-13, support 0.5680 5580, resistance 0.5990-95 0.6012
NZD Daily 55-DMA


DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• AUD/USD +0.4% from Mon 0.7016 low but sentiment uplift looks temporary

• Iran & Israel say strikes paused, skirmishes continue despite U.S. pressure

• Yemen's Houthis pledge to block Israeli maritime navigation in the Red Sea

• USD index back above 100.00, now targeting 100.64 resistance

• AUD break below 0.7111 55-DMA (& 0.7080 support) confirms downswing

• CN May trade balance due Tue, Reuters poll consensus $92.1 bln surplus

• Range Asia 0.7042-465, support 0.6834, resistance 0.7080 0.7200 0.7283
AUD Daily 55-DMA


DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

CIBC Research previews the June BoC policy decision on Wednesday.

"The Bank of Canada will hold rates steady and continue to stress that trade and oil price uncertainty mean that there are risks for interest rate moves in both directions," CIBC notes.

"...This week’s statement and press conference is likely to continue to point to two-sided risk for interest rates. Higher oil prices and inflationary pressures could warrant interest rate hikes at some point, but the potential for higher tariffs if CUSMA negotiations don’t progress well could warrant further cuts. Investors should be wary of paying too much attention if the word “consecutive” is used again in reference to a potential rate hike scenario, because the Bank is also likely to suggest that nothing is imminent at this stage and that policymakers are more than happy to wait to see how these risks play out," CIBC adds.

(Repeats from Friday with no changes)

June 5 (Reuters) - The Reserve Bank of New Zealand's predicament is far more complex than its messaging implies. Hawkish rhetoric at the RBNZ's May 27 monetary policy meeting prompted a wave of AUD/NZD selling that sent the cross down 2.5% in three trading days. Markets were particularly responsive to subsequentcomments by RBNZ Governor Anna Breman that the "OCR is likely to increase sooner and by more than previously signalled." With the Reserve Bank of Australia turning less hawkish following three consecutive rate hikes,it's logical to believe the near relentless AUD/NZD rally since April 2025 might be grinding to a halt. The 14.1% move has, after all, been underwritten by divergence in both countries' policy rates. However, AUD/NZD has already recovered more than half of its initial losses, largely due to doubts about the RBNZ's higher-faster rates narrative. The most obvious question is: if the RBNZ is so hawkish on rates, then why did it leave the OCR steady at 2.25% just over a week ago? It was Breman's casting vote that delivered this outcome. Rhetoric aside, the inconvenient truth is that the RBNZ has very limited ammunition in the inflation battle. Hawkish jawboning is being used to amplify the impact of a constrained capacity to tighten monetary policy in response to inflationary pressures. New Zealand's economy is far from buoyant despite a cumulative 325 bps of easing since August 2024. Annual GDP remained insipid at 1.3% in Q4, and while unemployment improved slightly to 5.3%, it remains close to 10-year highs. New Zealand is facing stagflation. With the recent government budget light on targeted fiscal support, the RBNZ is in a tight spot: one or two rate hikes could push the economy back towards recession. This leaves AUD/NZD traders in a quandary: do they believe the RBNZ rhetoric and unwind longs, or do they call its bluff, buy the dip and wait for reality to play out?
AUD/NZD Monthly


(James Connell is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai)

• EUR/USD hit 1.1500 in Europe's morning, pair hit a 2-1/2-month low, buyers then emerged

• USD, US yields , oil softened to help the pair lift off the lows

• The lift got an added boost after report Iran, Isreal halt strikes on Pres. Trump's urging

• Gold, silver, equities rallied & USD/CNH fell towards 6.7800 as risk-on took hold

• 1.1555 traded, the pair sat near 1.1535 late as the USD firmed up, pair up +0.12% late

• Daily doji formed & daily RSI diverged, could be technical warnings for EUR/USD bears
eurusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

• NY opened near 0.7055 after 0.7016 traded overnight, rally extended in early NY

• USD, US yields , oil sank on report Iran, Israel halt strikes

• Gold , silver equities moved upward on the report

• AUD/USD hit 0.7078 then began sliding as the USD & US yields firmed up

• USD/CNH rally away from the 6.7800 area also helped AUD/USD move downward

• The pair dipped below 0.7050, AUD/USD traded up only +0.07% in NY's afternoon

• Daily RSI diverge don today's low, daily doji formed; those give bulls some comfort
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

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.