FX markets open up in a steady fashion after Friday’s volatility. That session can largely be characterised as investors shifting to more defensive positioning ahead of the French election risk later this month. We do not look for the US data calendar to be a major driver of FX markets this week.
The highlight will be Tuesday’s release of US May retail sales, where the Retail Sales Control Group measure is expected to bounce back to 0.4% month-on-month having fallen 0.3% in April.
At last week’s FOMC meeting, Chair Jerome Powell characterised the US consumer as ‘solid’ and unless there is another downside surprise here, we cannot see market pricing of one-and-a-half Federal Reserve rate cuts this year moving substantially. In international news, China’s May activity data came out mixed. Despite some speculation over a rate cut, the People’s Bank of China kept the one-year MLF policy rate stable.
We read that as the PBoC prioritising a stable renminbi. DXY continues to thrash around in a broad 104.00-106.
50 range. Unless tomorrow’s US retail sales very much disappoint, French election risk should keep DXY generally supported. Chris Turner French bond futures were lower in Asia after a weekend poll showed Marine Le Pen’s National Rally party maintaining a substantial lead ahead of the first round of French elections on 30 June.
Friday had seen some heavy selling of euros, especially in the FX options space, where short-dated volatility surged, and the cost of .
