US FX WRAP: Dollar gains in risk-off trade as USD/JPY breaches 160

The Dollar saw gains against peers as it benefitted from the risk-off sentiment given retaliatory attacks seen from US and Iran in overnight trade. The most recent update, via Iranian Foreign Minister Araghchi was that there is no established method for negotiations now, between US/Iran, but messages are being exchanged, although no progress has been made. Although, he did add Iran and the Americans are studying the texts that were exchanged and working on a final draft. Elsewhere, ISM Services impressed on the headline, although prices did tick higher, while ADP, ahead of US NFP on Friday, printed 122k (exp. 110k, prev. 109k). On the Fed, Barr (Voter) said current policy is in a good place and likely to stay there for some time, while the influential NY Fed President Williams said monetary policy is in the correct place and there is no need to move on rates.

G10 FX was lower across the board, and weighed on by the rising Buck due to the aforementioned risk-off trade. Kiwi lagged, and probably not the main reason, NZ trade data was dismal overnight and fell much more than expected, and dropped significantly from the prior quarter. Its Antipodean counterpart twas the next worst performer, albeit on little currency-specific newsflow, as again, overnight Australian GDP Growth disappointed. Although, Australian S&P Global Services PMI Final for May printed 48.7, marginally topping the expected 47.7.

EUR, GBP, CAD, and CHF all saw losses to varying degrees, while the Yen was the 'relative' outperformer. USD/JPY hit a peak of 160.06, breaching the eagerly watched round 160 'touted intervention level'. There was plenty of jawboning overnight as Japanese PM Takaichi said she is prepared to take appropriate measures in the FX market at any time if needed, and that Japan is to deepen international cooperation, including with the US on FX. Moreover, BoJ Governor Ueda remarked that the BoJ’s basic stance is to continue raising the policy rate in accordance with economic, price, and financial developments. Ueda added that there are no signs that past rate hikes are curbing corporate fund demand, and that the upside risks to prices appear to be greater overall and are likely to emerge sooner.