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By XE Market Analysis June 9, 2021 2:38 pm
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    XE Market Analysis: Asia - Jun 09, 2021

    The Dollar perked up some in late morning trade, with the DXY recovering from seven-session lows of 89.84. The index had been at 90.00 at the open, and headed to highs of 90.14 after the London close. The 10-year Treasury yield recovered about 3 basis points from its one-plus month low of 1.472%, which likely prompted some USD short covering. Short covering in the Treasury market ahead of Thursday's CPI and jobless claims data was likely responsible for the early slump in yields. Wall Street remained on either side of flat ahead of tomorrow's key data. For May CPI, we look for prices to rise 0.3% from 0.8% overall, while on an ex-food and energy basis, a 0.3% increase is expected, versus the outsized 0.9% increase previously. Weekly jobless claims should see initial claims dip 5k to 380k, while continuing claims should ease 91k to 3.680 mln.

    [EUR, USD]
    EUR-USD hit N.Y. session lows of 1.2174, down from earlier six-session highs of 1.2218. The move lower came from the uptick in Treasury yields, where the 10-year rate fell to better than one-month lows of 1.472%. The yield has since popped up, back over the psych 1.50%, which aided the USD broadly this morning. Receding inflation fears so far this week had dented yields and the Dollar, but traders will tread cautiously into Thursday's May CPI report. A hotter than expected outcome could well see rates and the Greenback head higher, while a cooler result would likely result in the opposite. Until then, intra day ranges are likely to hold up.

    [USD, JPY]
    USD-JPY dipped to session low of 109.22, down from 109.53 highs seen after Tuesday's close. The Dollar overall came under some pressure, with the DXY touching one-week lows. Sliding Treasury yields appeared to have been the main driver of USD-JPY weakness through the morning, as the 10-year rate fell more that 5 basis points to 1.472%, the lowest in over a month. Short covering in Treasuries was a factor, as inflation concerns ease some. Later, as yields recovered, USD-JPY headed to highs of 109.65. Thursday's May U.S. CPI report will be key on the inflation front. For USD-JPY, support comes at the 50-day moving average at 109.16, with resistance at the psych 110.00 mark.

    [GBP, USD]
    Cable was heavy through the N.Y. session, bottoming at 1.4112 after the London close, after peaking at 1.4185 overnight. Average daily new Covid cases in the U.K. have risen 125% over the past two-weeks, and while deaths and hospitalizations remain low, there is some concern that the so-called delta variant of the virus could put an end to the planned removal of all Covid restrictions, set for June 21. A delay in reopening could have at the very least, have a psychological impact, and could well weigh on Sterling.

    [USD, CHF]
    The SNB continues to maintain its expansionary policy stance. The statement stressed that the pandemic "is continuing to have a strong adverse effect on the economy", adding that despite the "recent weakening, the Swiss franc remains highly valued" and against that background the policy rate was held at -0.75% and the bank stressed that "it remains willing to intervene in the foreign exchange market as necessary". The bank will also continue to supply the banking system with liquidity on "generous" terms. Nothing really new there, despite the fact that the SNB lifted its conditional inflation forecast on the back of higher oil prices and a weaker CHF. EUR-CHF briefly topped the key 110.00 mark for the first time in nearly two-weeks, though quickly turned lower, bottoming at 109.56, as the 50-day moving average at 1.1005 provided resistance.

    [USD, CAD]
    USD-CAD moved slightly higher from session lows of 1.2063 following the BoC announcement, where policy was left unchanged, as expected, topping at 1.2076 in a muted move. The statement indicated low rates for a long period, as the Bank "remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s April projection, this happens sometime in the second half of 2022". Overall, not a big initial CAD reaction to the about as-expected statement, though bigger picture, stronger oil prices and commodities overall should limit USD-CAD upside going forward. That said, WTI crude dipped from highs in afternoon trade, while the USD recovered saome early lost ground, seeing USD-CAD rally to 1.2117 highs.

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