• Yen corrects lower after biggest two-day rally in a year
  • US Dollar[1] back on offense before Fed’s Powell speaks
  • British Pound[2] casts wary eye on Q1 UK GDP revision

The US Dollar returned to the offensive in Asia Pacific trade as all eyes turned to an upcoming speech from Fed Chair Jerome Powell. He will address financial stability and central bank transparency at a Risksbank event in Stockholm. The comments may echo a similar talk delivered earlier this month[3] saying spillover risks will not delay the US tightening cycle. If so, the greenback has scope to continue higher.

Meanwhile, the Japanese Yen[4] turned lower as prices digested the sharpest two-day rally in a year. Those gains came as risk aversion triggered the unwinding of JPY-funded carry trades. Sentiment soured as President Trump bemoaned US/China trade talks, hinted at new tariffs on auto imports[5]– a move that would complicate NAFTA renegotiation efforts – and cancelled a June summit with North Korea’s Kim Jong-un[6].

UK GDP data headlines the economic calendar in European trading hours. The revised set of first-quarter statistics is expected to confirm that output added a meager 0.1 percent in the first three months of the year, marking the weakest performance in over five years. A downside revision echoing recently disappointing news-flow and leading NIESR data may cool BOE rate hike bets further, hurting the British Pound.

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