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FOREX: Sanguine Start Allows JPY, CHF to Roll Off Weekly Highs

FOREX
  • For the first time this week, JPY heads into the NY crossover as the poorest performing currency on an intraday basis, sitting mildly softer against all others in G10 after the sharp rally posted over the past few sessions. The resultant bounce in USD/JPY keeps spot prices pinned between two sizeable option expiries rolling off at today's NY cut, with $1.1bln of strikes expiring between Y153.91-00, and $1.4bln at Y155.30-50.
  • The JPY rally this week, and subsequent fade today, had dragged funding currencies higher in tandem, and the co-movement persists. CHF is softer alongside JPY, helping EUR/CHF bounce back toward the 200-dma of 0.9604.
  • The USD Index headed through the European open in negative territory, but greenback is off lows into NY hours. Ranges are tight, however, as markets tread water before the bigger data prints later today.
  • While spot markets are muted, front-end vol markets remain firm, with markets looking ahead to a busy week next week. The BoJ/Fed/BoE decisions are all due within a single 36 hour period, and all of which could have heavy market implications. USD/JPY one-week vols have been marked above 15 points for the first time since April, and only the second time in 2024. 
  • Today’s US PCE report for June will take focus, and markets will particularly watch non-housing core services PCE for the latest outturn and revisions, having moderated from 0.28% M/M to 0.096% M/M in May. There are no central bank speakers of note, with both the BoE and the Fed inside their pre-decision blackout periods. 
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