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Jun 07 - 03:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Retreats As Dollar Up Broadly On US Payrolls Beat

By Randolph Donney  —  Jun 07 - 02:00 PM

The dollar index rose 0.7% after non-farm payrolls and average hourly earnings surprised to the upside, even if the jobless rate rise did as well, with Treasury yields soaring and Fed rate cut pricing ebbing ahead of Wednesday's U.S. CPI report and Fed meeting conclusion.

Dollar gains were most acute versus risk proxies such as the Aussie, kiwi and Mexican peso, though the peso's recent dive has been fueled by political concerns.

EUR/USD fell 0.78% and was close to last week's swing low, 200-day moving average and flat daily cloud top by 1.0789.
The fall came as 2- and 10-year Treasury yields rebounded roughly 15bp from key support after the jobs report, weakening bund-Treasury yields spreads by about 7bp.
The market is now trying to square the circle of Thursday's ECB rate cut against its raised inflation and growth projections.

The upshot for Fed pricing is that a July cut looks highly unlikely, September is a coin toss, as is another in December.
And there's only one more ECB rate cut fully priced in before year-end.

The Bundesbank on Friday warned that upward pressure from wages means inflation is proving stubborn, which saw them raise their inflation forecast while lowering the growth projection.

USD/JPY rose 0.6% after probing the downtrend line from April's 160.245 peak by 1990's 160.35 high at 107.
Last week's 157.715 high by the 157.99 May 1 high and the last Japanese intervention point may well be in play if Wednesday's CPI report makes for a hawkish Fed announcement and press conference.

Prices came off their highs after U.S. equities rebounded from the knee-jerk sell-off response to the jump in Treasury yields.

Sterling fell 0.5% toward the 21-day moving average it's closed above since late April and last week's low at 1.2709/680.
That after yet another fleeting rise above 1.2800 earlier Friday.
The 30-DMA, kijun and 100-DMA at 1.2655/39/36 by the May 3 swing high look pivotal.

UK labor data is out on Tuesday, but U.S. CPI is the top data watch for next week.

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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