It's not just USD/JPY that is on the move so far today. The dollar is also marked lower against other major currencies, with EUR/USD being of particular interest as well. The pair is trading up slightly to 1.1040 after the Friday gains and looks poised to settle on a break to its highest since December last year.
The thing about the greenback's struggle is that it comes despite traders stepping back on the more aggressive Fed rate cut pricing. I would've expected that to at least keep any dollar softness in check but it isn't quite the case so far.
Traders are now pricing in just ~28% odds of a 50 bps rate cut next month. Meanwhile, there are ~95 bps worth of rate cuts priced in by year-end. Both of that are modestly lower as compared to before the US CPI report last week here.
And yet, the dollar is unable to find much reprieve in the ebbing Fed rate cut pricing. Is that a signal of more to come for the dollar for the remainder of the year?
One key spot to watch is still the bond market in that regard. 10-year yields in the US continue to languish and are now at 3.876% on the day, down by 1.5 bps. So long as yields stay pinned down, the dollar itself might struggle to find much traction or grip to hang on to.
And if the technicals are any indication, there could also be more pain in the short-term. The break higher in EUR/USD sees little challenging a further upside move towards the December highs of 1.1123-39 next.
