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Forex Today: Flight to safety continues at the start of the week

Here is what you need to know on Monday, June 13:

Markets remain risk-averse at the beginning of the week and the greenback capitalizes on safe-haven flows. The US Dollar Index rises for the fourth straight day and closes in on the multi-year high it set on May 13. The benchmark 10-year US Treasury bond yield stays within a touching distance of 3.2% and US stock index futures are down between 1.5% and 2.5%. The economic docket will not feature any high-impact data releases and the risk perception is likely to continue to drive the market action.

On Friday, the data from the US showed that the Consumer Price Index (CPI) jumped to a fresh multi-decade high of 8.6% on a yearly basis in May. This print surpassed the market expectation of 8.3% and caused investors to seek refuge. The S&P 500 Index lost nearly 3% and closed the previous week at 3,900. Over the weekend, the Financial Times reported that 70% of polled experts see the US economy tipping into recession next year. 

US CPI reverses to new four-decade high in May threatening GDP.

After spending the Asian session in a relatively tight channel, EUR/USD started to edge lower amid broad-based dollar strength in the European morning. The pair was last seen losing 0.3% on a daily basşs at 1.0485.

GBP/USD slumped to its lowest level since May 16 below 1.2250 on Monday. The data published by the UK's Office for National Statistics revealed that the UK economy contracted by 0.3% on a monthly basis in April, compared to the market expectation for an expansion of 0.2%. Other data from the UK showed that the Manufacturing Production and Industrial Production declined by shrank by 1% and 0.6%, respectively, in the same period. 

USD/JPY surged to its highest level in more than 20 years above 135.00 during the Asian trading hours on Monday. Japanese Chief Cabinet Secretary Matsuno said that they were ready to take appropriate actions on exchange movements if necessary and triggered a downward correction in the pair. Similarly, Bank of Japan Governor Haruhiko Kuroda acknowledged that the recent sharp drops in the yen's exchange were undesirable and not good for the economy. USD/JPY was last seen posting modest daily gains at 134.75.

Gold rose sharply on inflation fears late Friday and closed the week at $1,870. With the benchmark 10-year US T-bond yield staying in positive territory, XAU/USD is retreating toward $1,860 on Monday.

Bitcoin extended its slide over the weekend and ended up losing more than 11% last week. BTC/USD stays on the back foot and was last seen testing $25,000, losing nearly 5% on the day. Ethereum registered losses for the 10th straight week and touched its weakest level since February near $1,300 on Monday. 

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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