US recap: EUR/USD tumbles as US economy holds up better
May 31 (Reuters) -The dollar index rose 0.25% on Wednesday as EUR/USD slumped 0.56% following additional euro zone and China data suggesting less need for ECB rate hikes while U.S. job openings unexpectedly surged, though Fed hiking risk dimmed as the day wore on and ahead Friday's payrolls report.
Wednesday's derisking flows supported the dollar and yen havens more broadly, with the euro, yuan and China-linked currencies hardest hit.
The JOLTS surprise was offset to some degree by concerns the series may overstate labor tightness, a big negative miss from the Chicago PMI and Fed beige book and comments suggesting less need for a June rate hike.
The Fed and the ECB remain likely to hike rates by 25bp and 50bp, respectively, before topping out by 5.5% and 3.75%.
Variance from the 190k payrolls forecast on Friday could sway the rate hike timing between June and July, or none if it misses badly.
Further tightening due to labor, PCE and personal spending beats, plus an expected post-debt ceiling deal bulge in short-term Treasury issuance pushed 3-month T-bill yields up 11bp to 5.4% and 10-year-3-month spreads down to -1.77%, near May's 42+ year lows.
Banking stocks fell on the steepening yield curve inversion and the FDIC's Q1 banking report, but reduced losses on less hawkish Fed news.
EUR/USD fell to its lowest since March 20, with traders focused on an eventual retest of 2023's lows by 1.05, as 2-year bund-Treasury yields slid toward March lows.
USD/JPY retreated after a brief rebound with Treasury yields to Wednesday's 140.425 high on the JOLTS report, falling 0.34% and nearing tenkan support at 139.18. That with the MoF FX intervention threat this week.
Sterling recovered from early risk-off and JOLTS driven slides to post a 0.17% rise, with 2-year gilts and Treasury yields almost equal.
ADP, claims and ISM manufacturing are Thursday highlights.
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Editing by Burton Frierson
Randolph Donney is a Reuters market analyst. The views expressed are his own.
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