Daily Currency Update

USD - US Dollar

Thursday saw a notable change in direction for the dollar. The news of the Federal Reserve's intention to skip a rate hike in June, along with progress on the debt ceiling deal, led to a 0.8% decline in the USD. Whether this signifies a significant reversal for the dollar depends largely on the upcoming US activity data, especially price data, which will determine if the Fed has enough leeway to assess the impact of the 500 basis points of tightening thus far before rushing into further hikes. The anticipation of additional rate hikes heavily influenced dollar pricing and bearish risk sentiment last month. The release of today's US NFP (Non-Farm Payrolls) data will play a crucial role in deciding whether the Fed will proceed with rate hikes in June. From a foreign exchange perspective, we believe that a consensus-based increase of 195,000 jobs, an unemployment rate of 3.5%, and a 0.3% monthly rise in hourly earnings would not be sufficient to alter the prevailing view that the Fed will pause in June and the dollar will continue to remain relatively weak.

CAD - Canadian Dollar

Today, the Canadian dollar is continuing to strengthen. Over the past five sessions, the US dollar has experienced declines in four of them. If the CAD 1.3400 level is broken, it could indicate a test of the lower end of the range for this year, which is between CAD 1.3260 and CAD 1.3300. Based on the intraday momentum indicators, there is a likelihood of a rebound during early North American trading, and the initial resistance is expected around the CAD 1.3450 level. It is worth noting that in an environment where the US dollar is weak, the Canadian dollar tends to perform relatively worse in currency crosses. Observe the USD/CAD trends.

EUR - Euro

Despite Eurozone May inflation dropping more than anticipated, the EUR/USD experienced a rally. One possible factor supporting the EUR/USD was a slightly optimistic reassessment of global growth prospects. There is a growing belief that the late-cycle inflation might not be as severe as previously thought, which could lead to central banks avoiding extensive tightening measures that could worsen recessions. In relation to the European Central Bank (ECB), the market is currently factoring in two additional 25 basis point rate hikes. The outcome of today's US data will play a significant role in determining whether the recent low of 1.0635 for EUR/USD was a significant level. If the NFP (Non-Farm Payrolls) data doesn't indicate excessive strength, there is a possibility of EUR/USD reaching the 1.0810/20 range, with an outside chance of reaching 1.0865.