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EUR: The estimate for CPI is released today, together with the unemployment rate.   CPI is seen moving higher to 1.4% (from 1.2%), with unemployment also higher to 12.2%. Both present low risks for the single currency. EUR-USD technical update

USD:  The income and spending data are likely to be of modest interest for markets. The bigger risk is month end flows and positioning after what has been a pretty volatile month for FX.

Idea of the Day

It’s likely to be a busy one for FX markets.   FX volatility has increased through May (as measured by Deutsche’s CVIX index), with this most notable on the Aussie dollar, which so far has had its worth monthly performance (vs. the USD) since May of last year.

Being the last trading day of the week and month, the potential for volatility is greater today, as larger players adjust hedges and rebalance portfolios on the basis of the FX moves seen so far.  Technically, the euro looks firm into month end and has been the best performing currency on the major’s, standing up well to the firmer US dollar tone.

Latest FX News

JPY:   Latest inflation data showing inflation at -0.7% YoY, with the core rate (excluding fresh food) at -0.4%. Both in line with expectations.   More encouraging was industrial production data, rising a stronger than expected 1.7% in May, with housing starts also stronger than expected at 5.8%.   The yen held pretty steady during the Asia session, USDJPY tight to the 101.00 area.

AUD: Limping into month end after what has been a pretty monumental month for the currency that has defied the doubters month after month. A combination of factors have been behind the fall, but we are vulnerable to further volatility into month end.

EUR:  The euro has held up well for the month of, only modestly softer vs. the dollar overall which puts it at the head of the non-dollar majors for the month.   The move above 1.30 on EURUSD has been sustained during a steady overnight session. German retail sales data were weaker than expected on the monthly measure, falling 0.4% MoM after 0.1% decline yesterday.

Further reading:  Elevated US Yields Provide Support for the Greenback