FX Outlook: No Signals of Dovishness in Sintra

We expect ECB speakers at Sintra to broadly reinforce market expectations of another rate hike this year, following President Lagarde’s relatively balanced opening remarks. Meanwhile, the US dollar has continued to give back recent gains, with markets now turning their attention to upcoming data releases and Fed-related commentary, particularly Warsh’s speech at Sintra, which is expected to carry a hawkish tone. USD/JPY remains in the intervention zone, keeping Japanese authorities on alert.

USD: Losing Momentum Ahead of Key Data and Warsh

The dollar has softened against most G10 currencies, largely driven by improving risk sentiment as equities recover. Sentiment has also been supported by reports of renewed US–Iran negotiations despite recent geopolitical tensions. However, this risk-positive environment is weighing on traditional commodity-linked currencies such as the AUD, CAD, and NOK, as well as the yen. Even so, the recent decline in oil prices appears overstretched, and we still expect AUD and NOK to perform better into the summer, supported by carry and a more constructive energy outlook.

Attention now shifts to US data. We expect consumer confidence to come in above consensus at 97.5 versus 94.5, consistent with resilient US consumption. JOLTS job openings are forecast to edge lower to 7.25m (consensus 7.3m), which would still be consistent with a broadly healthy labor market given the vacancies-to-unemployment ratio remains above 1.0.

Overall, today’s data should be modestly supportive or neutral for the dollar. However, bullish momentum has clearly faded, and improved risk appetite limits upside potential for now, with markets instead looking to Warsh’s Sintra remarks and upcoming jobs data for clearer direction.

EUR: Sintra Likely to Be Uneventful for the Euro

Lagarde’s opening remarks suggested no meaningful shift in ECB communication strategy, reinforcing the view that Sintra is unlikely to trigger a repricing of policy expectations. She acknowledged a less urgent policy backdrop compared to 2022–2023 while noting continued economic resilience.

Nothing in this messaging is likely to materially alter expectations for another rate hike. We expect other ECB speakers to broadly support this view, even as recent sentiment data points to easing inflation pressures.

Upcoming eurozone CPI releases remain in focus. Spain surprised to the upside at 3.2%, France is expected to moderate to 2.0%, and Germany is forecast to hold steady at 2.6%. Overall, these figures are unlikely to significantly shift EUR direction.

We see downside risks for EUR/USD ahead of US data and Warsh’s speech, but continue to expect stabilization around or slightly above 1.140 rather than a retest of recent lows.

JPY: Approaching Intervention Territory

USD/JPY continues to trend higher, raising the risk of Japanese FX intervention. Authorities previously intervened heavily near 160, spending roughly $70bn when the pair moved above that level. The 162 area is widely viewed as a potential next line in the sand.

However, policymakers may prefer to wait for thinner liquidity conditions or key event risks before acting, including US holidays and upcoming macro catalysts such as Warsh’s speech and the US jobs report.

There is also a possibility that intervention is delayed toward mid-July, following seasonal patterns seen last year. Still, intervention would likely only slow the trend rather than reverse it, unless accompanied by a shift in BoJ policy or a broader turn in the US dollar cycle later in the year.