FX WRAP: Dollar loses appeal in risk-on trade

DXY was weaker as risk-on trade left the safe-haven currency's appeal being reduced. US data was absent, but we did hear from Fed's Barkin, who thinks being modestly restrictive is a reasonable place to be, believing there is some inflation persistence. Meanwhile, there was little reaction seen towards the SCOTUS decision to decline Trump's action to remove Fed's Cook in a 5-4 vote; now, we await an update on the actual mortgage fraud case concerning Cook. On geopolitics, strikes seen over the weekend between the US and Iran have stopped for now, yet Iran has rejected reporting and remarks from Trump that a meeting between the US and Iran is scheduled for this week, which allowed for an uptick in oil prices, leaving short-end yields firmer. DXY now trades around the lows of 101.07 from an earlier 101.394 high.

G10 FX was a mixed bag on Monday. Strength was led in GBP, EUR and NZD; meanwhile, CAD and JPY saw modest weakness. For GBP, outperformance followed UK PM candidate Burnham announcing a few economic plans, which were welcomed by markets, as they lacked any material changes. ING continues to see upside risks for EUR/GBP. "Our short-term fair value model indicates modest undervaluation (around 0.4%), political risk may resurface, and pricing for 25p of Bank of England tightening still appears too hawkish in our view." GBP/USD currently sits at  ~1.3260 highs.

EUR/USD entered a three-day streak of gains, now trading back above 1.140. Today, ECB President Lagarde spoke at Sintra, noting they are more likely to face shocks in the coming years that push inflation away from target, and European resilience means the ECB can raise rates to address inflation without fear that it becomes a source of financial stress. EUR/USD saw little reaction to the comments, which peaked at 1.14306 on the session.