USD: Dollar range-bound
The US dollar had a relatively flat trading session yesterday, extending the range-bound behaviour it has exhibited for most of May into June. The 99 mark – reinforced by the 50-day moving average hovering nearby – acts as solid support, while 99.25 serves as the first resistance level, followed by 99.50 as the second.
Conflicting signals out of Hormuz, while investors continue to cling to a de-escalation narrative, appear to have frozen the dollar’s safe-haven appeal – and with it, its price action. A parallel risk-on tone in equities, led by AI-driven euphoria in US stocks, has further paralysed that appeal. At the same time, selling USD more aggressively remains unwarranted. Firstly, from a technical perspective, the DXY remains within the below-100 corridor it consolidated into following heavy sell-offs tied to tariff jitters in early 2025. Secondly, a resilient macro backdrop, coupled with accelerating price pressures, is keeping hawkish expectations elevated. Against this backdrop, accompanied by declining FX volatility, the US dollar maintains its carry appeal, which offsets a more subdued safe-haven tone.
Meanwhile, yesterday saw the release of April’s JOLTS report. While the series is typically quite volatile, the near two-year high in job openings – significantly exceeding expectations with a 750k upside surprise – was notable. At the same time, the quits rate, a key gauge of employee confidence in securing new employment, came in below expectations. Overall, the data continue to point to a resilient labour market despite ongoing geopolitical concerns, while also reinforcing the case for a more hawkish-leaning Fed this year. In response, the 2-year OIS curve – a key measure of Fed expectations – has risen by nearly 7 bps so far this week, further supported by Monday’s upbeat ISM manufacturing report.
Today, focus shifts to the ISM services counterpart and ADP numbers. A likely solid outcome – supported by continued AI momentum in the services sector – is unlikely to move the USD much despite continued upside risk to front-end rates. We believe that the proximity to the much-anticipated June policy meeting, with Kevin Warsh in charge, may prompt investors to hold back on more meaningful USD buying just yet. Market participants are likely to wait for clearer signals from Warsh’s communication and policy guidance. This will serve as a useful diagnostic to confirm whether risk premia linked to fears of politically driven dovishness have receded, potentially paving the way for more constructive hawkish support for the dollar.
EUR: EUR/USD flat, bias still tilted lower
EUR/USD remains relatively flat on a month-on-month basis, hovering near the 1.16 lows and sitting below all key moving averages. Risks continue to point to the downside, as the impasse over Hormuz drags on and the relative yield advantage has shifted in the dollar’s favour since the conflict erupted earlier in the year.
Yesterday saw the release of May’s eurozone inflation (aggregate figure). We did not expect much to the upside, given the broadly subdued prints from member countries the week prior, notably Germany and France. The trajectory remains upward nonetheless, with headline y/y at 3.2% – the highest level since September 2023. Markets continue to price in nearly a full rate hike for next week, on the view that the ECB may act pre-emptively, largely for signalling purposes, to convey readiness.
The overall setup therefore continues to point to subdued support from rates for the euro, as there is little basis for a sustained hawkish narrative given the soft macro backdrop – especially if the inflation shock proves transitory rather than entrenched.
For the week, we continue to expect a similar range-bound pattern, with scope for a test of 1.16 on a meaningful upside surprise in Friday’s jobs report.
GBP: Sterling holding steady in quiet markets
Sterling traded quietly on Tuesday, with GBP/USD edging toward the upper end of its 1.34–1.35 range and GBP/EUR hovering in the 1.15–1.16 band. Price action remains range‑bound, with little to dislodge the pair from familiar levels.
External forces continue to dominate, and for now have been broadly supportive. The Middle East conflict has pushed UK yields higher without materially denting global risk sentiment, with US equities still near record highs, allowing sterling to hold steady via the risk channel.
However, the underlying picture is less convincing. Sterling is better described as passively supported rather than actively sought. The absence of negative catalysts, rather than positive domestic drivers, has mainly kept it afloat. It continues to track global risk and USD dynamics yet has failed to fully participate in risk‑on moves of late, highlighting a lack of conviction.
This reflects a fading domestic backdrop. Earlier support from relative growth resilience and a firmer rate outlook has weakened, while political risk is creeping back into focus ahead of this month’s by‑election. Renewed concerns around policymaking and fiscal discipline remain a latent risk, particularly given ongoing pressure on Prime Minister Starmer.
In this environment, as we’ve stated for several weeks, sterling looks supported but lacking momentum – stable on the surface, yet fundamentally fragile beneath.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: June 1-5
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
