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Greenback Touches Fresh Cycle Best, Bull Trend Intact

FOREX
  • The greenback trades well, firmer against most others in G10, with the USD Index rising to a new cycle high at 106.437 in overnight trade.
  • GBP/USD has been a subject of focus following jobs markets data. While average weekly earnings data came in ahead of expectations, the unemployment rate unexpectedly surged higher, potentially flagging labour market weakness ahead - another dovish consideration for the UK MPC going forward. There's been no let-up for GBP vols following this morning's data, however, with overnights now capturing the Wednesday CPI release. Overnight implied has cleared 13 points, to double the YTD average background vol of 6.5 points. This blows out the break-even on an overnight GBP/USD straddle to ~65 pips, thereby capturing the cycle low and key support at 1.2409.
  • Topside USD/CAD has also drawn attention, key element being the break of congestion at 1.3614 (high from Mar 19, 22, 25 and 29). 1.3855 is next upside target - and the more markets row back on Fed rate cut pricing for this year, trend conditions should hold in bull-mode for the pair.
  • Canadian CPI data takes focus going forward, with markets expecting CPI to have picked up to 0.7% M/M, and to 2.9% Y/Y. Importantly, the trimmed mean measure is expected to stand inline with previous at 3.2%. US industrial and manufacturing production numbers are also due.
  • CB speak consists of speeches from Fed's Jefferson, Williams, Barkin, Collins and Powell - who participates in a moderated Q&A session. ECB speak is headlined by Villeroy and Vujcic - but they're likely to stick to the well-worn theme of flagging the growing likelihood of a June rate cut, and justifying policy divergence with the Federal Reserve.
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