FX Daily: Euro already prices a hawkish ECB in Daily Currencies Ratings 12/06/2026 USD: Dollar holds its bullish bias despite US core CPI Price action in interest rate markets is telling us a lot about sentiment. Despite yesterday’s US May core CPI reading of 0.2% month-on-month, which allayed fears of second-round effects, markets are still pricing in a 25bp Fed hike by year-end. Equally in the euro rates space, our rate strategy colleagues note that short-dated EUR swap rates have lost their tight correlation with crude oil and remain very elevated. In short, it looks like it will take a lot to shake off the narrative that central banks will react to the current energy price shock. US input into that story comes in the form of May PPI data today. Remember that parts of the PPI release, such as healthcare, financial services, airfares and insurance, feed into the Fed’s preferred measure of inflation, the core PCE deflator, which is released on 25 June. Last month, the core PCE deflator rose to 3.3% year-on-year, further away from the Fed’s 2% target. And another strong set of PPI readings today stands to keep short-dated interest rates and the dollar supported as we head into next Wednesday’s FOMC meeting. In the background, emerging currencies in Asia continue to struggle. Portfolio outflows are weighing on the tech-sensitive Korean won and Taiwan dollar. We have not touched on the idiosyncratic sell-off in the Indonesian rupiah recently, but Tuesday’s emergency rate hike by Bank Indonesia has failed to quell many concerns over local policy decisions there. Of course, there is also a lot of focus on USD/JPY, which looks to be sitting comfortably above 160. For reference, speculative positioning data show net yen shorts running at around 25% of open interest. During the Bank of Japan’s successful FX intervention campaign in 2024, which was helped by the Fed swinging dovish, speculative yen shorts were above 50% of open interest. This serves as a reminder that Japan