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By XE Market Analysis June 2, 2015 6:14 am
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    XE Market Analysis: North America - Jun 02, 2015

    The euro has been better supported, and the Australian dollar rallied following the RBA's unchanged policy announcement. EUR-USD managed to lift back toward 1.1000 after skirting to a 1.0891 low on Monday following above-forecast U.S. data. EUR-JPY is also trading at five-month highs, and most other euro crosses are holding firm. A step-up in top-level political pressure from key Eurozone leaders to come up with a bailout deal that would be acceptable to the Greek government has given the euro an underpinning, while Eurozone CPI was also confirmed at +0.3% y/y, up from 0.0%, in final May data. USD-JPY has settled lower after the recent rally extended to 125.05 on Monday, which was the best level since 2002 in nominal terms. AUD-USD has traded above 0.7700 as the post-RBA rally extends. AUD-JPY rose to a five-day high of 0.7709 after the RBA refrained from cutting rates at its policy review, which leaves the cash rate at 2.0%, while governor Stevens' statement was without a clear bias, although he said "further depreciation" of the Australian dollar against a basket of currencies "look both likely and necessary"

    [EUR, USD]
    EUR-USD managed to lift back toward 1.1000 after skirting to a 1.0891 low on Monday following above-forecast U.S. data. EUR-JPY is also trading at five-month highs, and most other euro crosses are holding firm. A step-up in top-level political pressure from key Eurozone leaders to come up with a bailout deal that would be acceptable to the Greek government has given the euro an underpinning. Eurozone CPI was also confirmed at +0.3% y/y, up from 0.0%, in final May data. On the dollar side, a minor boost to the rekindled Fed tightening theme from above-forecast May PMI and construction spending data hasn't been sufficient to offset broader euro gains. Focus will fall on factory orders numbers today, ahead of the May payrolls report on Friday. We think the data will collectively maintain September as a potential date for the Fed to make a modest first rate hike, though it's a tight call.

    [USD, JPY]
    USD-JPY has settled lower after the recent rally extended to 125.05 on Monday, the best level since 2002 in nominal terms. BoJ policymakers have recently indicated there is no need for further easing, but the slowing Tokyo CPI to 0.5% y/y from 0.7% y/y and the mixed domestic growth figures suggest that more easing will eventually be needed. The bottom line for USD-JPY is that ultra-loose 'Abecomics' monetary policies are likely to be remaining in force when the Fed eventually does reach rate hike lift-off, and this narrative is underpinning USD-JPY.

    [GBP, USD]
    Sterling was lifted moderately by UK data, with BoE lending data showing a surge in mortgage lending and the Markit construction PMI jumping more than expected, both influenced by the favourable UK general election result in early May. However, the lending data also showed a disappointing decline in lending to businesses, while market participants will be looking to tomorrow's services PMI, as the service sector is multiple times bigger than the construction sector. Cable rose to a peak of 1.5246, extending the recovery from yesterday's three-week low at 1.5170. Yesterday's high at 1.5304 provides an upside marker. On the downside, the 50- and 100-day moving averages are presently converging at 1.5166-68, just below yesterday's low. We don't anticipate strong direction bias for now.

    [USD, CHF]
    EUR-CHF has re-established itself below 1.0400 following broad euro declines during the latter half of May. Swiss policymakers remain in a fight to curtail EUR-CHF's downside, with SNB chairman Jordan over the weekend once again threatening intervention if necessary. SNB's Zurbrugg said in May that negative rates in force for as long as policy requires. The central bank in April expanded the number of groups subject to negative rates on deposits at the central bank in a fresh effort to curtail demand for the franc. The SNB said at its last policy review in March that the franc is "significantly overvalued," and would "remain active in the foreign exchange market, as necessary."

    [USD, CAD]
    USD-CAD logged a fresh six-week high at 1.2563 on Monday following perky U.S. data, which stocked the rekindling Fed tightening debate. This extends the recovery USD-CAD has seen from a four-month low at 1.1920, which was seen on May-14. The pair has now breached back above a previous support zone marked by 1.2351 to 1.2400, which leaves a convoluted technical picture in the bigger view.

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