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US recap: EUR/USD up as data help Fed skip story



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June 1 (Reuters) -The dollar fell on Thursday as another Fed official added his voice to the chorus suggesting a break the chain of 10 straight rate hikes in June, debt ceiling angst dwindled and U.S. data hinted that the economy is cooling, led by falling real wages and rising borrowing costs.

Risk-on flows and long dollar haven trades were also trimmed after a rare bit of good news from China and a bigger-than-forecast drop in euro zone inflation countered by ECB President Christine Lagarde's warning the bank had more tightening to do.

That was a warm-up for Thursday's big ADP beat, huge downward revisions to U.S. Q1 and Q4 labor costs and Challenger layoffs surging 20% in the worst 5-month stretch, outside the pandemic, since 2009.

Jobless claims were steady and close to forecast, while May ISM manufacturing saw marginal improvement in employment, but with new orders and prices paid plunging, favoring those betting against the dollar and on the Fed's June rate hike skip perhaps marking a peak.

Friday's payrolls data are now key for the Fed view and dollar. Repeated payrolls beats could make a miss more dollar bearish.

A June hike is now a long-shot with a final 25bp July hike a toss-up and rate cuts priced to begin in earnest starting in December.

The ECB continues to be priced to hike 25bp at each of its next two meetings before a slow retreat in 2024, as euro zone core inflation remains well above U.S. inflation.

EUR/USD rose 0.7% to its highest in six sessions as 2-year bund-Treasury yield spreads rebounded 5bp, getting a leg up from oversold charts.

Sterling and the risk and China-linked AUD/USD gained 0.74% and 1.15%.

USD/JPY lost 0.4% in line with retreating Treasury-JGB yields and the reversal of May's overbought uptrend.

For more click on FXBUZ



Editing by Burton Frierson
Randolph Donney is a Reuters market analyst. The views expressed are his own.

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