We reach the last day of the month and also a Friday, which brings risk of greater volatility than we’ve seen in recent days as institutional investors and others adjust positions and hedge into month end. We pointed out at the beginning of the month that May has traditionally been a good month for the dollar in recent years and although the dollar has risen overall, it has been modest in comparison to previous May’s. After the weaker than expected US GDP data yesterday, which revised the first quarter into negative territory, the dollar was weaker, but managed to recover into the European close.
The overnight session has seen the yen gain, with weakness on USDJPY the main exception to the firmer dollar tone during May (the other being the CAD). Inflation data in Japan was broadly in line with expectations, headline prices jumping to 3.4% on the back of the sales tax increase. Data for Tokyo for May was a touch firmer at 3.1% (from 2.9%). The remaining data for today, such as income and spending data in the US, alongside final Michigan confidence data, is unlikely to take precedence over month end positioning. Watch EURJPY, which is sitting bang on the 200d MA at 138.37, which provided strong support 21st and 28th of May.