[MARKET ANALYSIS] DXY gains on renewed strength in oil prices; SEK and CHF digest a hold, NOK reacts to a hike

• G10s are mostly lower against the USD, albeit only marginally. The EUR holds afloat, joined by the Kiwi, Loonie and GBP, whilst the CHF underperforms a touch.
• DXY holds within a 101.00 to 101.21 range. The Dollar traded steady throughout overnight and early-European trade, but then moved higher alongside a bout of strength in the energy complex. This came after an IRGC official noted that the “war could expand” to the Indian Ocean or Bab el Mandeb Strait if the US decides to go to war again. More generally, crude benchmarks will be digesting reports that the US dismissed Iran's Hormuz offer during UN talks, saying Tehran does not control the Strait. Given the lack of progress this week, yields have extended back towards highs; the US 2yr holds around the 4.9% mark, just shy of the prior day’s peak at 4.94%.
• Fed’s Williams spoke this morning, where he suggested it was reasonable to see another rate hike by year-end. Markets are pricing in a 38.4% chance of one 25bps hike by year-end, with a c. 50% chance of another this year.
• Policy announcements from the SNB, Riksbank and Norges Bank have led to some volatility in the respective currencies. Kicking off with SNB, the Bank opted to hold rates, lifted inflation projections and removed its “increased willingness” for intervention. As such, the CHF moved lower following the announcement. Over in Sweden, the SEK was initially choppy following the Bank’s decision to hold rates. But then gradually strengthened, as the Bank lifted its rate path forecasts to imply a hike towards the end of this year/start of next year. Elsewhere, the only hike today was delivered by Norges Bank. It lifted its Key Policy rate by 25bps to 4.50%, and reiterated its tightening bias. EUR/NOK knee-jerked lower as traders unwound their bets of a hold, before paring around half of that move. (Please see the respective Policy Announcement headlines for further analysis)

Sessions of this kind, where several central bank decisions land alongside a geopolitically driven oil move, have a familiar sequencing: the dollar firms on the crude spike, and idiosyncratic domestic currency moves play out underneath the broader USD bid. The transmission here runs through freight and risk premium on crude, lifting front-end yields and with them the dollar, a channel that has historically dominated the usual rate-differential drivers when Hormuz or Red Sea risk is repriced. On the central bank side the pattern is equally well worn: a hold with a raised projected path, as with the Riksbank, tends to be read as hawkish in the near term, while a delivered hike paired with a tightening bias, as with Norges Bank, has typically been prone to partial retracement once unwind flows of stale positioning wash through, which is what the EUR/NOK paring reflects. The SNB's removal of its intervention language is the sort of signal that has historically mattered more for the franc's medium run than any single session move. What bears watching next is whether the oil bid sustains beyond the headline-driven bounce, whether Fed speakers shift the pricing on a further hike, and follow-through on the Nordic central bank rhetoric, since in episodes of this kind the G10 crosses tend to mean-revert once the energy move fades.