Buck falls, risk-appetite dropping, Majors rising

According to the Bloomberg Dollar Spot Index, the Buck has been rising since the end of May, gaining slightly more than half a percent over that period.

Markets have largely been able to ignore concerns regarding energy costs and the likelihood of future supply volatility, supported by optimism around demand for microchips and earnings in the sector. Nevertheless, Broadcom shares tumbled 12.0% in premarket trading after missing expected quarterly revenue, frustrating investors who were hoping for a stronger AI-driven boom. The S&P 500 Index’s winning streak failed to extend to a tenth day.

There are reports of more ships transiting the Strait of Hormuz; however, the news has not been viewed positively, but rather as evidence that this may become a constrained channel for shipping and energy transport going forward. There is growing hope that the ceasefire agreed upon between Israel and Hezbollah in Lebanon could support ongoing negotiations between the U.S. and Iranian delegations. Tomorrow will be particularly important, as anticipation builds ahead of the Non-Farm Payrolls release, with the full Employment Situation report due at 8:30 AM.

EUR

The Euro is strengthening, recovering some ground after several indicators came in better than expected. While a reading below 50.0 still indicates contraction rather than expansion, S&P Global Composite PMI figures for May reflected a slightly more positive outlook than anticipated.

Additionally, April retail sales were revised upward, with March’s figure changing from a contraction of (-0.1%) to an expansion of 0.8%. This revision lifted the annual rate from 0.3% to 1.0%. Tomorrow, the final reading of Q1 GDP and quarterly employment data for the Eurozone will be released.

JPY

The Japanese Yen is trading slightly stronger against the Buck this morning, though it remains close to key levels that could once again trigger FX intervention. Through May 27th, the Bank of Japan coordinated approximately 11.0 trillion yen in intervention efforts to help stabilize the currency and prevent further depreciation.

Additionally, BOJ Governor Kazuo Ueda indicated that a rate hike at the June 16th meeting would be appropriate. Nevertheless, while these factors can support the Yen, there are concerns that repeated rounds of intervention have not fully achieved their intended effect. Others argue that the BOJ has successfully established a floor for the JPY and that, over the longer term, these interventions may have generated capital gains for the government. It remains to be seen whether further measures are forthcoming and whether increased “hawkishness” can support a sustained appreciation.