The USD index backed off Tuesday’s post-CPI lows as above-forecast U.S. retail sales firmed up U.S. Treasury yields, helping to unwind the extreme selling that had beset the U.S. currency.

The retail sales data tempered the more extreme dovish Fed rate expectations in Q2 2024 and beyond.

IRPR on Eikon still indicates a better-than 60% chance for a 25bp Fed rate cut in May 2024 and a full cut by the Fed’s June 2024 meeting.
However, year-end rate-cut estimates are currently at -87bp for December 2024 from near -100bp immediately after Tuesday’s U.S. CPI release.

EUR/USD fell 0.3% to 1.0848 as U.S. Treasury yields in the 2-10-year space are up 10bp giving back approximately half of Tuesday’s post-CPI 20bp slide.
EUR/USD resistance remains firm near 1.0882, the 61.8% Fib of 1.1150-1.0448, the pair failing to close above 1.0882 for the second straight session.

USD/JPY moved back above 151, once again eying the oft-touted 2022 high at 151.94 and zone around 152 seen as a potential intervention area.
Yen shorts remain emboldened as U.S.-Japan rate spreads remain to the overwhelming advantage of dollar longs.
Without an overt dovish lean by the Fed or a hawkish tilt by the BoJ it appears USD/JPY bulls will not be denied a test of MoF resolve by 152.

GBP/USD slid away from Tuesday’s 1.2506 high.
Bears initially leaned on the pound after UK CPI came in below expectations removing any remaining hawkish notes to BoE policy.

The pound moved lower still after U.S. retail sales beat forecast.

CAD and Aussie held slight gains as falling rates lifted global growth expectations.
Commodity-related currencies shrugging off the fall in oil as the dollar rallied.

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