JP Morgan Research discusses the scope of further JPY intervention by Japan's MoF.

"It is clear from recent developments that Japan’s currency  authorities view USD/JPY 160 as a line in the sand. Whether  additional intervention occurs will depend on how the market  evolves, but estimated intervention to date totals around JPY  9 trillion—below the JPY 15 trillion seen in 2024—suggest ing there is still room to intervene. As such, if USD/JPY rises to around 159–160 again, the likelihood of additional  intervention is high," JPM notes.

"The 160 level is, if anything, a politically determined  threshold. In June and July 2024, after USD/JPY had moved  into the 162 area, prominent LDP politicians commented that  the BOJ should raise rates to curb excessive yen weakness,  and the BOJ surprised the market by hiking. The BOJ’s rate  hike last December following the formation of the Takaichi  administration can be interpreted in a similar context. In  Japan, the MoF is responsible for FX policy, which makes the  latter more susceptible to a political overlay," JPM adds.

• Cable falls to 1.3494 as pound weakens on Times report about Wes Streeting

• Streeting is preparing to resign and is likely to mount Labour leadership challenge

• 1.3494 is the lowest level since April 30 (1.3455 was the low that day)

• Long-dated gilt yields rise in response to Times report about Streeting

• 1.3500 was GBP/USD low on Tuesday, as UK political turmoil hurt pound

• Warsh has big plans for the Fed, but results may take time

GBPUSD


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

• USD/JPY has edged higher from 157.56 to 157.89, on Wednesday, EBS data shows

• It continues to trade within the daily cloud that currently spans the 156.29-158.82 region

• It has broken above the kijun line, currently at 157.86, a close above would be bullish

• The kijun line is the midpoint of the last 26-day trading sessions

• Verbal warnings are unlikely to stop a USD/JPY recovery

• However, according to ex-BOJ chief Kuroda, the yen unlikely to fall below 160 per dollar

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

Daily Chart


Correlation Chart


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

• Soon-to-expire FX option expiries attract the most related FX hedging flows around the strikes

• DTCC data shows EUR 1.9 billion EUR/USD strikes at 1.1700-10 for Wed's 10-am New York cut - EUR/USD currently 1.1705

• Thursday shows a further 1.8 billion euros expiring 1.1700 and 3-billion 1.1665-80 and 2billion 1.1750-55

• There are plenty more strikes in the immediate vicinity expiring on Friday and throughout next week

• Related hedging flows are helping to keep EUR/USD spot volatility and ranges tamed of late

• Related comment - Sell the USD but don't throw the receipt
EUR/USD FX option strike expires between May 13-22


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

Copper's rally is becoming an increasingly important FX theme as investors price in stronger demand from electrification, grid upgrades, EVs and the AI/data-centre buildout. The metal is central to power transmission, cooling systems, wiring and renewable infrastructure, while mine supply remains slow to respond. That combination has lifted copper's strategic importance and could keep the currencies of major producers better supported.

The clearest FX beneficiaries are the Chilean peso and Peruvian sol. Chile and Peru are among the world's largest copper exporters, so higher prices can improve their trade balances, fiscal revenues and investor sentiment. The Australian dollar may also benefit, though its copper exposure is part of a broader commodity story that includes iron ore, coal and LNG. The Canadian dollar has a more indirect link through energy, metals and North American power infrastructure, while the Mexican peso and Brazilian real could also draw support from copper output and broader industrial commodity demand.

These currencies are relatively attractive to investors because most are freely floating or broadly market-determined, making them easier to trade than tightly managed FX regimes. Several also offer interest rates above comparable U.S. levels, particularly in Latin America, adding a potential carry incentive alongside the commodity story.
Copper


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

• Copper has risen almost $2500/ton in less than two months

• May's high at $14196/ton is close to Feb's $14527ton record peak

• Shortage of copper used for AI, EVs, grids and renewables

• Chile and Peru are world's largest exporters

• Peso and sol float freely and are supported by i/rates of 4.5 and 4.25%

• Indonesia, Australia, Brazil, Canada and Mexico also export copper

• Next target for copper is $14911/ton ($18122 is main target)

•
Copper


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

• Cable has traded a 19.5 pip range thus far Wednesday; 1.3529-1.35485

• Tuesday low was 1.3500, as UK political turmoil weighed on the pound

• 1.3500 is the lowest level since April 30 (1.3653 was Monday high)

• UK PM Starmer vows to carry on governing; King's speech at 1030 GMT

• Starmer is due to meet potential leadership challenger Streeting pre-speech

• 10-year gilt yield hit 18-year high on Tuesday. Why are Britons so fed up?

GBPUSD


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

• AUD/USD flat Wed as markets calibrate diverse internal & external factors

• U.S.-CN meeting in focus, trade & business agenda expected main agenda

• AU Q1 housing finance: owner occupied -4.3% q/q, investment -3.0% q/q

• Iran peace deal breakdown elevates U.S. oil stockpile concern, WTI $101

• AU budget investment tax changes not market moving in short term

• AUD less likely to mount challenge of 0.7283 resistance, may soften further

• Range Aisa 0.72315-475, support 0.7100 0.6834, resistance 0.7283 0.7661
AUD Daily 55-DMA

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

• USD/INR opens at 95.61 against 95.6275 previous session

• India hikes import duties on gold, silver to 15% to curb imports; Indian PM Modi on Sunday had urged citizens to reduce gold buying

• Diminishing gold linked demand could ease USD/INR's upward momentum for a day or two but don't expect trend to reverse, trader says

• Underlying flows picture remains supportive of pair moving higher, trader adds; points out that NDF maturities, debt payment outflows should cushion USD/INR on Wed

• Asian currencies mostly rangebound, dollar index at 98.3

• Brent crude at $106.7 per barrel, down nearly 1%(Reporting by Jaspreet Kalra)

• AUD/USD flat Wed, wage inflation remains elevated & housing finance recedes

• AU Q1 wage price index +0.8% q/q (poll +0.8%), +3.3% y/y (poll +3.3%)

• AU Q1 housing finance: owner occupied -4.3% q/q, investment -3.0% q/q

• U.S.-CN meeting in focus, trade & business agenda expected main agenda

• U.S. inflation jumps most in 3-years, Apr CPI 3.8% y/y (prior 3.3%)

• Oil stockpile concerns escalating as Iran peace deal tanks, WTI above $100

• AUD short of required momentum to mount 0.7283 challenge, may soften further

• Range Aisa 0.7232-435, support 0.7100 0.6834, resistance 0.7283 0.7661
AUD Daily 55-DMA

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

• Australian mining stocks rise as much as 2%, making them among the top gainers in the broader benchmark , which is down 0.6%

• Sub-index on track for third straight day of gains, if trends sustain

• Copper prices edged to a three-month high on the back of fund buying due to supply issues, shrugging off worries of a lack of progress to the end of the Iran war [MET/L]

• BHP and Rio Tinto advance as much as 2.4% and 2%, respectively

• Both stocks notch record highs

• YTD, AXMM up 20.8%, including the day's moves, outpacing a 0.9% loss in the AXJO
(Reporting by Nikita Maria Jino in Bengaluru)

• USD/JPY proving buoyant despite intervention risk, Asia 157.57-67 EBS so far

• Back to around middle of 156.28-158.82 daily Ichimoku cloud, 100-DMA 157.38

• 100-DMA looks to maybe work as pivot again, kijun above at 157.86

• Feeling 158 maybe the new 160, moves to and above could spur MOF/BOJ action

• Hourly chart shows sideways action, downside supported by renewed bids

• Japanese importers almost constant buyers into Tokyo fix, specs on dips

• Pop in US yields post-CPI saw short JGB-US Treasury rate differentials wider

• Differential at longer end of curve sideways, in 10s @188 bps vs 2s @257 bps

• On options front, massive $1.8 bln expiries today between 157.00-05

• Topside, $1 bln in expiries at 158.00 strike, $1.9 bln up at 159.50

• Related comments , , , also

• US markets , , ,

• On US CPI, budget , ,

• Fed Goolsbee on CPI , for more click on [FXBUZ]

USD/JPY:


JGB-US Treasury 2-year interest rate differential:

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

• NZD/USD +0.3% from Tue 0.59345 low as traders lean towards higher OCR

• RBNZ Q2 inflation expectations survey due Wed (prior 2.59% 1-year)

• Futures market pricing now implies 59.7% chance of May 27 hike

• Pair becoming well supported above former 0.5930 resistance

• U.S. inflation spikes most in 3-years, Apr CPI 3.8% y/y (prior 3.3%)

• Oil stockpile anxiety rising as Iran peace deal evaporates, WTI +4.1%

• U.S.-CN meeting in focus, trade & business agenda expected to dominate

• Range NZ 0.5944-545, support 0.5930 0.5680, resistance 0.6090-95 0.6120
NZD Daily 55-DMA

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

• AUD/USD +0.4% from Tue 0.7209 low despite concerning U.S. inflation update

• U.S. Apr core CPI +0.4% m/m, +2.8% y/y (Reuters poll consensus +0.3%, +2.7%)

• WTI +4.1% as stockpile depletion fears mount & Iran peace hopes fade

• AU budget delivers investment tax changes, scant market impact short term

• AU Q1 wage price index due Wed, will gauge stubborn services inflation

• AUD pushing upper hourly Bollinger band, topside momentum likely to slow

• Overnight range 0.7209-435, support 0.7100 0.6834, resistance 0.7283 0.7661
U.S. Inflation and Interest Rates


AUD Hourly Bollinger Study & DXY Daily 55-DMA

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

Goldman Sachs Research revises its CNY forecasts higher.

"On the currency front, a combination of moderate nominal currency appreciation and renewed domestic inflation has resulted in a real appreciation, but that still leaves the CNY more than 20% undervalued versus the Dollar on a weighted average of our two valuation models, and at some of the cheapest levels on a real-trade-weighted basis over the past couple of decades. The strength in recent fixing behaviour and the gradual drift up in exporter conversion ratios suggests to us that a gradual but sustained move is still the right baseline," GS notes.

"Therefore, given the passage of time, we are now rolling forward our year-end target of 6.70 for USD/CNY, and extending Renminbi strength further. Our new forecasts for USD/CNY are 6.80, 6.70 and 6.50 in 3, 6, and 12 months (compared to 6.85, 6.80 and 6.70 previously), with our new 12 month forecast notably stronger than consensus and forward," GS adds.

• GBP$ soft in NorAm afternoon trade, -0.63% at 1.3524; NY range 1.3544-1.3500

• Pair puts in worst daily performance in 2-mos, finds support by daily cloud top at 1.3514

• Combination of dimming Mideast peace prospects, UK political angst sinks bulls

• UK long-end gilts near trend highs as UK fiscal concerns ramp up on political concerns

• UK CPI on May 20 in focus for clues at BoE hawkishness, March CPI y/y was 3.3%

• GBP$ supt 1.3514 daily cloud top, 1.3500 Tues low/psychological lvl, 1.3484 100-DMA

• Res 1.3544 NorAm high, 1.3578 falling 30-HMA, 1.3610 Tuesday high

• A close below the10- & 21-DMAs shifts momentum to bears for test of 100-&200-DMAs 1.3484/25

GBP Chart:


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

• EUR/USD opened NY near 1.1740 after 1.1788 traded overnight, pair neared 1.1750 early

• Sellers emerged again after above estimate April CPI rallied the USD, US yields

• USD/CNH turned up, gold, silver & stocks fell all of which contributed to the USD's bid

• EUR/USD fell below the 10- & 21-DMAs, hit 1.1722, neared 1.1730 late, was down -0.45%

• Move below the 10- & 21-DMAs, falling daily RSI could be worries for EUR/USD bulls

• Contracting 15-mo Bolli bands, May doji candle could be added concerns for bulls
eurusd


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

• AUD/USD fell to 0.7209 in Europe's morning, NY opened near 0.7225, pair then hit 0.7232

• Sellers emerged however when USD, US yields rallied on US April CPI data

• Risk soured; gold, silver added to losses, UD/CNH turned up & stocks traded down

• AUD/USD fell below the 200-HMA, traded down to 0.7214 then bounced

• Some late day USD weakness sent AUD/UD toward 0.7225 late in the session

• AUD/USD traded down -0.34% but remained above the 10- & 21-DMAs

• Consolidation phase, rising monthly RSI, widening Bolli bands are bullish signals
audusd


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

JP Morgan still looking to sell USD/JPY around 158.

"Little news out of the Bessent meetings which should not surprise anyone and the price action this morning is pretty consistent with an official rate check. If this is the case it shows they remain in the game and we think progress towards 158 will be difficult," JPM notes.

 "Not easy sitting here bleeding carry being short USDJPY but will persevere looking to add towards 158," JPM adds.

(Corrects typo in headline) Sterling faces increased volatility as a convergence of domestic political uncertainty and deteriorating geopolitical expectations threaten to deepen the currency's current retreat. Prime Minister Keir Starmer defied calls to resign, telling ministers he would get on with governing despite a "destabilising" 48 hours of growing calls to set out a timetable for his departure after a drubbing in local elections.

These political fractures, combined with diminishing hopes for a U.S.-Iran peace deal after Iran rejected the latest U.S. proposal, have effectively sapped sterling bulls of their recent vigor.

The technical picture is equally precarious. GBP/USD has failed to sustain gains in the mid-1.36s, tumbling through the rising 10-DMA at 1.3565 and prior support at 1.3543. Today's dip into the daily cloud has shifted momentum, putting the 100-DMA support at 1.3484 firmly in focus as bears gain control of the price action.

Fundamental pressures are mounting via the debt markets; rising long-term gilt yields reflect growing fiscal anxiety that a potential shift in government could lead to an unfunded spending spree, straining the UK’s financial position. Furthermore, resurgent oil prices and hot U.S. CPI data serve as a grim preview for UK inflation. This leaves the Bank of England in an increasingly awkward position, forced to navigate stagnant growth against a backdrop of rising prices. Unless the pair can rally above the 21- and 10-DMAs, recent support near 1.3550, the path of least resistance remains toward late-April lows by the rising 100-DMA at 1.3484, the 200-DMA at 1.3425 and then the daily cloud base at 1.3295.
Sterling Chart:


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

SocGen Research sees a scope for further weakness in the UK Gilt markets and GBP over the coming days.

"30-year Gilt yields are making a beeline for 6%, reflecting growing pressure on Prime Minister Starmer to resign, and the possibility that the Government will shift further to the left. GBP/USD is currently down 0.6% but a 0.2% rise in EUR/GBP is hardly dramatic. However, we are likely to see further gilt and sterling weakness in the coming days," SocGen notes.

(Typo in headline)

• EUR/GBP response to the political noise has been surprisingly muted

• Spot nearing 0.87 but given where 30yr UK yields sit, door is open to 0.8750

• Confirmed Starmer resignation would likely lead to another leg lower in GBP

• But attention will quickly shift to who replaces Starmer - matters more in medium term

• Streeting seen as more market-friendly than Burnham, latter adds risk to gilts/GBP

• Support in the cross stands at 0.8600-15. Resistance at 0.8750
EURGBP vs 30yr


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

Bank of America Global Research argues that US labor data suggests hike risk should be higher.

'The US rates market puts very low risk (5bp) of near-term Fed rate hikes despite solid US employment data. Many in the market believe there is a high bar for Fed hikes given (1) dovish incoming new Fed Chair Warsh (2) median Fed member that believes policy restrictive vs 3% anchor (3) slowdown concern / Iran resolution optimism," BofA notes.

"Our counter to market belief in high hike bar: (1) Warsh is only one individual vs shifting FOMC tide (2) financial & US economic conditions do not suggest policy is restrictive (look at equities & US corporate earnings) (3) consumer spending has been robust. In this note we explore US rate implications shifting Fed hike risk," BofA adds.

CIBC Research discusses its reaction to today's US April CPI report.

"Price pressures were red-hot in the US in April, with the headline CPI rising by a 0.6% m/m pace as expected by the consensus. That reflected another lofty increase in gasoline prices and a pickup in food, which left the annual pace at 3.8%, up from 3.3% in the prior month. The first signs of passthrough from the oil shock into core elements were on display, with the ex. food/energy measure rising by 0.4% m/m (vs. 0.3% expected), with airfares up strongly, while some tariff-exposed categories including apparel added to the upside, leaving the annual pace at 2.8%," CIBC notes.

"This data only includes the first signs of broader spillover from the oil price shock into core components, and annual inflation is set to move higher in May, which will leave the Fed on the sidelines until there are signs of oil prices heading sustainably lower," CIBC adds.