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FOREX: USD Trades New Monthly High as EUR Stress Stems From EGBs

FOREX
  • The greenback trades well, firmer against all others ahead of the NY crossover as volatility stemming from European bond markets works its way into currency markets. The USD Index has cleared resistance at the weekly highs, hitting the best levels since early May and extending the rally off the post-CPI lows to 1.3%.
  • The widening German/French bond yield spread has weighed heavily on the single currency, as concerns around Macron's popularity are compounded by an election pact formed among the left wing - providing another hurdle to the centrist alliance parties to retain power after the two election phases later this month.
  • JPY intraday vol has picked up. While the BoJ kept policy unchanged, the press conference with Ueda was of the most interest, who triggered a phase of JPY weakness by failing to disclose the specifics around the trimming of bond buys - helping tip USD/JPY back above Y158.00 and to another post-intervention high of 158.26. The backtrack in USD/JPY only came as the BoJ governor talked up the possibility of a July rate hike, should data prove supportive.
  • Import/export price indices cross later today ahead of the prelim University of Michigan sentiment survey. Markets may be particularly sensitive to any unexpected step lower in inflation expectations as part of this release, a weak number would add to the dovish pressure stemming from the PPI, CPI prints earlier in the week. 
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