U.S. Session Forex Recap – May 24, 2016

  • U.S. May flash manu PMI down from 50.8 to 50.5 vs. 51.0 forecast
  • Fed official Williams: Worried about Brexit and weaker CPI expectations
  • Fed officials Williams & Harker: 2-3 rate hikes still possible this year

The Greenback’s performance was as mixed as a bag of M&Ms when it strengthened against the comdolls and European currencies but gave up ground to the yen.

Major Events:

Remarks from Fed officials – With no top-tier reports on the docket, traders focused on hunting for clues on the Fed’s next moves from central bankers’ speeches. According to Fed officials Williams and Harker, two to three rate hikes are still possible this year but the June decision will still be data-dependent.

For Federal Reserve Bank of San Francisco head John Williams, there are still risks stemming from a potential Brexit and weaker inflation expectations, both of which might be enough reason to sit on their hands next month. Meanwhile, Federal Reserve Bank of Philadelphia head Patrick Harker was more optimistic in projecting that the U.S. economy can achieve its inflation target over the medium term once energy prices stabilize.

More risk-off flows to JPY – The Japanese yen seems to be leading the race among the lower-yielding currencies, supported by rumors that the BOJ is gearing up to end its QE program by setting aside some reserves. Market watchers also seem to be convinced that the central bank won’t intervene in the forex market anytime soon, especially since the G7 leaders recently emphasized that they won’t engage in competitive devaluation.

Major Currency Movers:

JPY – The Japanese currency continued to exert its dominance against its forex rivals, thanks to risk aversion and lower odds of central bank intervention.

USD/JPY broke below the 109.50 area of interest to a low of 109.34, EUR/JPY is testing support at the 122.50 minor psychological mark, GBP/JPY is down from the 159.00 levels to a low of 158.10, and AUD/JPY broke below the 79.00 mark to a low of 78.80.

Watch Out For:

  • 3:00 am GMT: RBA Governor Stevens’ speech

See also:

Asian Session Recap

London Session Recap

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