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May 23 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Eases After Strong US PMI

By Paul Spirgel  —  May 23 - 02:25 PM

The dollar index reversed its early slide, trading up 0.1% at 105 in the U.S. afternoon with the help of forecast-beating U.S. PMI data that pulled U.S. Treasury yields higher and reduced Fed rate cut expectations further.

LSEG’s IRPR page is now indicates 58% odds for a September Fed cut and slightly above 80% odds for a November move, well below pre-data levels.
For the full year futures are indicating 36bp worth of easing, well below early 2024 levels of -160bp.

EUR/USD was down 0.06% at 1.0815, as early gains that followed upbeat German and euro zone PMIs unraveled in the wake of U.S. PMI.

With ECB expected to cut quicker and deeper than the Fed, the euro is likely to remain under pressure.
LSEG’s IRPR shows near 100% odds for a June rate cut and 58bp worth of cuts by year-end.

USD/JPY was up 0.07% at 156.99 after earlier hitting a trend high of 157.19 on the PMI data.
With no sense of BoJ or MOF interventions on rates or currency, the wide interest rate spread between the U.S. and Japan should continue to exert downward pressure on the yen, though the market may become hesitant as 160 approaches, fearing official action.

GBP/USD followed other major currencies lower, down 0.15% at 1.2699.

Recent support by Wednesday’s 1.2701 was being tested.

Mixed UK PMI data lent no support to the pound after more upbeat U.S. PMIs.
Despite the soft performance, GBP/USD remained near Wednesday’s trend high at 1.2761.

Given the parallel path of UK and U.S. rate expectations, with futures signaling the Fed and BoE beginning to cut rates in September or November and near 35bp of cuts by December meetings, barring a data surprise GBP/USD is likely to remain anchored near current levels.

Ethereum rose 1.3% to $3,793, after putting in a new trend high at $3,946.
Bitcoin, which had been following ETH higher, fell 2.5% to $67.6k, down from a session high above $70k.
Both were hurt by higher Treasury yields, though upbeat ETH ETF expectations were providing support.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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