Dollar's Mixed Performance

The dollar remained largely steady against most major currencies but experienced sharp losses against the Australian dollar. Investors weighed signs of a weakening U.S. economy against political uncertainties in Europe.

U.S. Economic Data

U.S. retail sales grew by only 0.1% in May, falling short of the Reuters forecast of a 0.3% increase. A downward revision showed a 0.2% decline in April, highlighting the softness in the data. Despite a more significant-than-expected rise in U.S. industrial production, which offered some relief, the retail sales figures were the session's primary catalyst.

EUR/USD Movements

EUR/USD rose from near the day's low of 1.0710 following the retail sales headlines to a peak of 1.07615 during the U.S. morning before the lift subsided. The pair remained below key moving averages after its decline from the June 4 high of 1.0916.

GBP/USD Analysis

GBP/USD bounced off support at 1.2669 after the U.S. retail sales report caused Treasury yields to dip. The support levels from the last three sessions—1.2669, 1.2660, and 1.2658—held firm, while resistance was seen at Tuesday's high of 1.2720 and the falling 10-DMA at 1.2742. Upcoming key events for sterling include Wednesday's UK CPI and Thursday's BoE meeting, which will likely influence further movements.

USD/JPY Fluctuations

USD/JPY dropped from Tuesday's high of 158.22 to 157.52 following the decline in Treasury yields but later returned to the 157.80s. Resistance remains in the mid-158.20s, near recent highs, as markets stay cautious of potential MoF intervention as the 160.00 level approaches. Lower Fed rate expectations and a narrowing U.S. yield advantage are weighing on USD/JPY, with risks still tipped to the upside unless there is a decisive move from either the BoJ and MoF or the Fed.

AUD/USD Gains

AUD/USD capitalized on the soft U.S. yields that followed the retail sales report, rising sharply, though it remained within its broad range of 0.6580-0.6710. This movement followed a hawkish hold from the RBA that met expectations. Fed policymakers maintained a generally optimistic stance that rates can gradually come down, but emphasized that more time is needed to observe data and ensure inflation is declining.

Market and Commodity Overview

U.S. Treasury yields fell roughly 5-6 basis points, while the S&P 500 was up 0.27% in New York afternoon trade. Commodity prices also firmed, with WTI rising 0.8%, copper advancing 0.93%, and gold increasing 0.43%.

Trade Summary

In the afternoon trade, EUR/USD was flat, USD/JPY was up 0.1%, GBP/USD was down 0.03%, and AUD/USD was up 0.57%. These mixed movements reflect the ongoing balancing act between the softening U.S. economic data, potential rate cuts, and geopolitical uncertainties, particularly in Europe. As the market digests these various influences, upcoming data releases and central bank actions will be closely watched to gauge the next steps in monetary policy and their impact on currency movements.

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