US FX WRAP: Dollar flat as Middle East dominates despite dove Waller

Analysis details (20:19)

The Dollar ended the day flat, but concluded the week with gains as the Middle East has dominated direction despite the FOMC on Wednesday. Back to Friday, Philly Fed disappointed, but Fed’s dove Waller gave notable remarks, albeit didn’t garner much of a reaction. Waller has been known to be out of consensus for a while now, and he did not miss a beat today, noting the Fed is in a position as early as July for cuts. Barkin (2027 voter) toed the usual Fed line and followed Powell on Wednesday as he sees no rush to cut interest rates, and nothing urgent in the data warranting a rate cut at this point. Aside from that, Israel/Iran took the highlights, with Trump stating on Thursday [on US market holiday] he will decide within two weeks whether to attack Iran. DXY traded between 98.536-98.898.

G10 FX largely saw losses against the Greenback with Antipodeans and the JPY lagging, while EUR was the distinct outperformer and saw gains, while GBP was flat. Currency-specific newsflow was light, and the Euro strength was likely driven by the positive geopolitical updates and lower oil prices. EUR/USD traded between 1.1491-1.1543. Overnight there was hotter-than-expected Japanese CPI, but muted reaction was seen in the Yen. USD/JPY saw an earlier low of 145.13 but currently sits at its high of 146.00. USD/CAD traded between tight parameters, although Canadian retail sales disappointed, with ex-autos M/M even unexpectedly falling. Antipodeans were hit by the broader risk sentiment, and AUD/USD and NZD/USD hit lows of 0.6452 and 0.5965, respectively, a level they both currently sit around.

GBP was choppy as it saw immediate weakness on a dismal UK retail sales report, as the headline plunged 2.7% M/M against an expected decline of 0.5%. On the data, volumes fell across all sectors, and primarily in food stores, though a particularly strong prior figure appears to be influencing that component to a degree. Overall, the data skews the dial towards the dovish side of the BoE – as a reminder June's decision was unchanged but subject to dissent from three MPC members who wanted a 25bps cut. However, the main focus point remains on the progress of disinflation, for which there are numerous relevant data points before the August MPC.

EMFX was broadly weaker, although ZAR did strengthen against the Greenback amidst a lack of any data/notable headlines. Despite saying that, the Yuan saw modest upside overnight as the PBoC set USD/CNY mid-point at 7.1695 (exp. 7.1801, prev. 7.1729), which was the strongest CNY fix since March 17th.

20 Jun 2025 - 20:19- ForexData- Source: Newsquawk