The risk switch flicked to on, lending support to the Antipodeans and sapping strength from the yen as the working week in Asia was drawing to an end. Both U.S. Tsys and e-mini contracts found poise amid continued assessment of the outlook for Fed tightening campaign.
- USD/JPY ran as high as to Y133.50 before giving back the bulk of its earlier gains as U.S. Tsy yields lost altitude. Risk reversals crept higher, with one-year skews returning above par. The yen remains the worst G10 performer as risk-on impetus seemingly outweighed slight tightening in U.S./Japan yield gap. Note that there is a notable $1.7bn option expiry with strikes at Y133.98-00 due at the NY cut.
- The kiwi dollar paced gains, setting the tone for the outperformance of commodity-tied FX bloc. The kiwi looked past a quarterly survey which showed that inflation expectations of New Zealand households have stabilised.
- AUD/NZD went offered in line with a move in Australia/New Zealand 2-year swap spread. The spot rate fell to its lowest point in 10 days, with its 100-DMA now within sight. That moving average has remained intact since Dec 2021.
- The sterling traded on a softer footing ahead of the release of UK data which is expected to show that domestic economy slipped into contraction in the second quarter.
- Flash UK GDP & industrial output, Swedish CPI will take focus in European hours, while the American docket is headline by flash U.S. Uni. of Michigan Survey (inflation expectations gauges from that survey will be closely watched). Fed's Barkin will make a TV appearance.