North American FX Open - Euro rises after EZ CPI comes in faster than expected

Overall DOLLAR trade has been uneven overnight, as traders position themselves heading into month end.

Usd/Jpy has enjoyed a steady bid in the European session, rising to 157.37 so far, after the Japanese finance ministry announced that they spent a record Jpy 9.8 trillion in the past month to prop up the Japanese unit, which is slightly higher than the Jpy 9.4 trillion amount that has been expected.

Overnight, Tokyo CPI matched expectations at 2.2% y/y vs 1.8% last. Inflation accelerated in May, helping maintain expectations the BOJ is largely on track to consider a rate hike in coming months even as the economy continues to show signs of weakness.

Eur/Usd has rebounded to 1.0851, after the EZ CPI flash estimate for May came in faster than expected. The headline rate quickened to 2.6% y/y from 2.4% y/y in April, above the 2.5% y/y consensus forecast and the core rate reaccelerated to 2.9% y/y compared to the 2.7% forecast and April print. A rate hike still looks to be very much on the cards for next week, after the ECB's Panetta called the data "neither good nor bad," but the data has pushed back expectations as to when a follow up cut will be delivered. German 10 year yields rose to their highest level since mid November in response.

The Chinese composite PMI for May was a disappointment coming in at 51.0 vs the 51.7 print in April. The manufacturing reading slipped to 49.5 from 50.4.

In the UK, the Lloyds Business Barometer jumped to 50 in May, way above the 40 consensus forecast, which is the highest reading since November 2015.

Meanwhile the Nationwide reported that UK house prices had risen by 1.3% y/y in May. UK mortgage approvals fell to 61.1k in April from 61.3k in March.

The main focus data wise today is set to fall on the US PCE Core Deflator for April, which is the Fed's preferred inflation gauge. The y/y reading is expected to remain at 2.8%, while the m/m figure looks set to rise by 0.2%. There are fears of a more robust reading, as the price increase for food away from home is counted in core and supercore PCE, but not in core CPI.

Other US data includes personal income/spending and the Chicago PMI.

North of the border the focus is on growth, with the release of the Q1 GDP and March prints, as well as the flash estimate for April. A quarterly annualized figure of 2.2% is the consensus forecast. The numbers are the final top tier data update before next week's Bank of Canada monetary policy decision.

There are no central bank speeches scheduled for the session, although we may hear from the Fed's Bostic after hours.

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