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USD Storms to New Highs, As Post-CPI Strength Persists

FOREX
  • The USD is higher against all others in G10 as the currency continues its post-CPI uptick. The USD Index crested at a new multi-month high of 105.737 in early European trade, with options market activity providing support as demand for USD upside dominates.
  • JPY also trades firmer, recovery off lows as a supportive Japanese yield curve lends some strength - nonetheless the dominant dollar theme has underpinned a new cycle and recovery high at 153.39 in USD/JPY.
  • EUR/USD has caught focus, with the pair breaking 1.07 on the way lower to print the lowest levels since November as rate differentials weigh. ECB speak has proved negative for the pair so far today, after ECB's Stournaras stated that it's time for the ECB to diverge from the Fed. Implied pricing still heavily favours a June cut from the ECB (a notion backed by ECB's Kazaks this morning), while Fed rate cut pricing continues to be pushed back - with July now seen as a coin toss.
  • Asset markets could see extra sensitivity across the University of Michigan sentiment release, as markets look to gauge any feedthrough from March's higher-than-expected CPI into inflation expectations. Import/export price indices are also due on top of speeches scheduled from Fed's Collins, Schmid, Bostic and Daly.

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