The dollar rebounds sharply (+0.5% to 105.14 for the '$-Index') 48 hours ahead of the publication of the 'PCE' index.
The euro falls symmetrically by -0.5% to 1.0850, while the yen sinks by -0.4% to 157.65.

The bond market had one of its worst sessions of the year, and the greenback was supported by a sharp rise in yields (+9Pts to 4.6300% on the T-Bond 2034), although it was even worse in Europe (+10Pts on average): German 'harmonized HICP' inflation climbed from +0.4% to +2.8% in May (well above the consensus of +2.6% to +2.7%).
The German CPI suffers from an unfavorable basis of comparison, as prices had fallen at the same time last year due to a voluntary reduction in public transport prices.
The CPI 'core' consumer price index over one year stands at 3%.
This undermines expectations of an ECB rate cut as early as next Thursday (June 6), followed by a second cut on July 18.
Traders believed this after the statements made by Luis de Guindos, Vice-President of the European Central Bank, a week ago.
But the picture has changed in 3/4 sessions, with rates (Bund and OAT) up +15pts, and if the ECB does act next week, a further cut in mid-July looks very much in doubt, unless idyllic inflation figures are released by Friday (prices in Spain tomorrow, and in Europe and France on Friday).
Forex traders will be holding their breath until Friday at 2:30 p.m., when US PCE inflation data will be published: the Federal Reserve's favourite price dynamics indicator is expected to fall slightly.
The key issue could be the yen's fall back below 158 against the dollar, which could trigger further intervention by the BoJ.

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