US FX WRAP: DXY sees slight gains after hot flash PMIs, seeing Yen lag with USD/JPY reclaiming 159.00

Analysis details (20:25)

The Dollar is slightly firmer following the S&P Global PMI's coming in hotter than expected. All 3 components of the index rose from the prior, with all components remaining in expansionary territory. The manufacturing PMI hit a three-month high of 51.7 (exp. 51.0, prev. 51.3) and Services rose to 55.1 (exp. 53.7, prev. 54.8), seeing the composite tick up to 54.6 from 54.5. The dollar initially reacted to the upside following the release, with modest strength following. The DXY reached sessions of highs of 105.91 and is set for its third week of consecutive days ahead of the anticipated US Core PCE on Friday next week, as well as the final estimate of Q1 GDP. 

The Euro was flat heading into Flash PMIs for France and Germany, with weakness emerging once the countries reported misses on all fronts. France saw the biggest drop in its Manufacturing component to 45.3 (exp. 46.8, prev. 46.4) while Germany's Manufacturing was well below market expectations at 43.4 (exp. 46.4, prev. 45.4), driven by production declining the most in three months. EUR/USD looks set to finish the week marginally sub 1.07, the level it started the week at. For the weak ahead, the European calendar is quite light, though, France and Italy report early estimates for Inflation for June.

Cyclical currencies performance was mixed against the greenback, with the Aussie the clear laggard while the Kiwi was flat. Cable saw a slight upside in reaction to UK Retail Sales increasing much more than thought to 2.9% M/M in May (exp. 1.5%), supported by sales at non-food stores reversing its 3% slump in April to a 3.5% increase; the surge in sales was fuelled by improved weather. Nonetheless, some gains were offset by a soft UK Flash Services PMI, which fell to 51.2 (prev. 52.9, exp. 53), though these losses were shortlived, perhaps influenced by a slight beat on Manufacturing, which rose to 51.4 (prev. 51.2, exp. 51.3) while the earlier Retail Sales strength helped limit losses in the Pound vs the buck, while the Pound was flat vs the Euro.

The Yen and Franc both fell in Friday's session, with the Havens among the worst performers in the G10FX space, with the Yen underperforming. Yen saw some brief weakness overnight after Japan reported a slightly softer-than-expected CPI for May at 2.5% (prev. 2.2%, exp. 2.6%) while a fall M/M in the JibunBK PMI Flash data for June did little to help. Nonetheless, the main driver was the strong US data, which took USD/JPY back above 159.00 after the overnight weakness was pared. USD/JPY peaked at 159.62. Yen watchers’ eye the nearby 160 level as a possible entry point for the BoJ to intervene, and the BoJ SOO next Monday.

EMFX: MXN extends its strength from yesterday's strength filled by stronger Retail sales and President-elect Sheinbaum naming her cabinet members. USD/MXN declined for the first time in 5 weeks, ahead of the Mexico Central Bank Rate decision on Thursday. TRY is flat in advance of the CBRT Overnight Rate Decision on Thursday next week. HUF is flat vs the Euro after Gross Wages Y/Y ease from the prior month. BRL was flat vs the buck but saw some weakness after some punchy commentary from President Lula, calling BCB Chief Neto an "opponent" and that a weak BRL is not a worry for the government.

21 Jun 2024 - 20:25- ForexData- Source: Newsquawk