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US recap: EUR/USD up as durables, U.Mich leave dollar flat

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May 24 (Reuters) -The USD index added to early weakness on Friday, falling 0.41% to 103.97 by the U.S. afternoon after some softer U.S. durable goods revisions and diminished one- and five-year inflation expectations in the University of Michigan report.

Looming holidays on Monday in the U.S. and UK may have dramatized moves as liquidity dried up after the London close.

EUR/USD rose 0.36% to 1.0854 as ECB rate cut expectations are slipping slightly.

Though a June ECB rate cut is still priced at better than 80%, and easing projected by the end of the year is now at 55bp down from near 70bp last week.

That outlook is propping up EUR/USD. Next Friday’s May HICP inflation will be keenly watched for euro zone inflation’s path. A services inflation rise above 4% may prod the ECB to pass on a June cut, which would be EUR positive.

USD/JPY rose +0.07% to 156.87, moving in a tight 157.15-156.83 range. Traders looked past lower -- but as-forecast -- Japanese CPI and despite the slight dip in USD/JPY traders have been respecting the wide rate spread differential between the U.S. and Japan.

With the in-court CPI data not likely to prod the BoJ to hike rates, risk in USD/JPY is likely to remain to the upside, though with some hesitance on the approach to 160 due to fears of Japanese intervention.

GBP/USD trudged higher, making a run at Wednesday’s 1.2761 high. The pair made it as high as 1.2751 before sellers brushed it back slightly. With UK CPI a tad hotter than forecasts on Wednesday, traders have peeled back expectations for early BoE rate cuts. The ensuing slide in cut odds -- which have been pushed out to September-November from June-August, as per LSEG’s IRPR -- has put the 2024 high at 1.2894 on March 8 on bulls' radar.

The slight dip in US Treasury yields after durables lifted BTC into positive territory, +1% at 68.5k. Ether, which has had a blistering hot month, rising 25%, was down 2% at $3,675 as traders lighten recent longs into the holiday weekend.

For more click on FXBUZ

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


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