Overview: Daily Forex WrapThe USD index continued its charge from yesterday as policy pergence begins to take hold between ECB and the Fed. In the latter half of the session, strong US Housing Starts (M/M 1135K vs. Exp. 1015K) which posted its largest 1 month gain since 1991 and US Building Permits data (M/M 1143K vs. Exp. 1064K) printed its highest reading since June 2008 offered further to support to the greenback. In contrast, at the European cash open, ECB’s Coeure stated that the ECB would front load QE purchases before the illiquid summer months, and said theoretically negative interest rates could still be in the cards, which sent instant pressure through EUR on the break below 1.1200. In terms of Greek updates, EU’s Juncker said that he expects an aid agreement to be reached on Greece by the end of this month or the beginning of June; however, he added that an aid deal will not be reached in Thursday and Friday’s meeting in Riga. Meanwhile, Greek PM Tsipras stated that discussions with creditors are near the end, with the government willing to compromise to reach a deal. Elsewhere, major pairs nursed significant losses against the USD, with GBP/USD the notable underperformer as UK CPI (Y/Y -0.1% vs Exp. 0.0%) entered deflationary territory for the first time since 1960, which saw the pair plummet by close to 200 pips.
Commodity-linked currencies have been weighed on by the weakness in the commodity complex given the firmer USD. AUD shrugged-off dovish RBA minutes overnight, which stated that a lack of guidance does not limit scope for a future rate move. Overnight, NZD led the rebound in antipodeans following the NZ 2-yr CPI expectations bouncing off a 15-year low, which saw NZD/USD temporarily break above the 0.7400 handle before trending lower as the USD reclaimed the 95.00 handle. Heading into the European close, NZD/USD remained unfazed following the release of the Fonterra Global Dairy Trade Auction fell 0.5%, while the price index fell 2.5%. Looking ahead tomorrow sees the release of the BoE minutes, US Fed releases Minutes, Japanese GDP and comments from Fed’s Evan’s (Voter, Dove).